tax credits working tax credits child tax credit

Everything you need to know about Tax Credits

 

tax credits working tax credits child tax credit

 

Everything you need to know about Tax Credits

What are Tax Credits?

A tax credit is a state benefit which will give people that are responsible for children, on a lower income or disabled workers additional money.

There are two types of tax credits- Working tax credits or child tax credits. Depending on your circumstances you might qualify for one or both of them.  All tax credits are tax free and you don’t have to be paying national insurance or tax in order to qualify. How much you will get will be determined on your household income and circumstances.

Tax credits are payed by the state straight in to bank accounts via the tax office. If you are 16 or over and live in the UK you can apply.

Working Tax Credits

Working tax credits are eligible to anyone who works. You can apply if:

  • You are age from 16 to 24 and have a child or qualifying disability
  • You are 25 or over with or without children

You also must:

  • Work a certain number of hours a week
  • Get paid for the work you do
  • Have an income below a certain level

The basic amount of working tax credit is up to up to £1960 a year. You could get more or less depending on your circumstances and income. The amount you get will depend on a number of factors such as:

  • Your relationship status – couples need to make joint claims which is based on household income
  • If you have a disability – More is available if for people getting some disability or sickness benefits
  • Your income – The bigger the income the less you’re likely to get
  • Working hours – You must be working over the minimum weekly hours for you to be eligible. Overtime hours will only count if you work them regularly

Child Tax Credits

You may be entitled to claim child tax credit if you’re responsible for children either:

  • Aged 16 or under- you can claim up until the 31st of august after their 16th birthday
  • Under 20 and in eligible education or training

You don’t have to be working to claim child tax credit. Only one household can claim child tax credit for a child. You may also be entitled to more tax credit if your child is disabled.

The amount you can get depends on how many children you have and whether you are making a new claim or are already claiming child tax credit. The amount is dependent on household income, how many children are living with you and how much money you spend on childcare.

Important changes made to child tax credit

As of the 6th April 2017 there have been two major changes to child tax credit.  From this date on you will no longer get:

  • The family element of child tax credit if there are no children on your claim on are born before 6th April 2017
  • The child element of child tax credit for a third or later child born on or after the 6th April 2017 unless they are one of the exceptions listed below.

This only affects children born after the 6th April 2017. Your tax credits won’t change if all your children are born before the 6th April 2017.

Exceptions only apply to the 3rd and later children on a claim who are born before 6th April 2017.

If you already get child tax credit for 2 or more children you may be able to claim the child element for children born on or after the 6th April if one of the following applies:

  • Multiple births – If another pregnancy results in a multiple birth on or after the 6th April 2017 you will get the child element for all but one of those children.
  • A child you’re claiming for has a child – If you get child tax credit for 2 or more children and one of them has a child you can claim for their child. You can continue to claim till they either leave the household or your child makes a claim themselves.
  • You adopt a child – You can claim for an adopted child that is from a local authority care on or after the 6th April 2017.
  • A child born as a result of non-consensual conception-You can claim for this child if you get Child Tax Credit for 2 or more children and a child born on or after 6 April 2017 is likely to have been conceived either as a result of a sexual act which you didn’t or couldn’t consent to or at a time when you were in an abusive relationship, under ongoing control or coercion by the other parent of the child. You can’t claim this if you live with the other parent of the child. You can however qualify for this whether or not there’s been a court case or conviction of a criminal offence.

 

How to claim

To claim tax credits you need to fill in form TC600. You can get this form by completing in HMCR’S tax credit claim form online or you can request a form by phoning 0345 300 3900.

To find out whether you are eligible for child or working tax credit and for what amount you are eligible, use the Government’s Tax Credit Calculator.

If you require any further information on tax credits or have some questions about your eligibility, get in touch by emailing info@wkm-accountancy.co.uk or by calling 0115 8240 555.

WKM Accountancy services welcome new apprentice

Kayleigh Rawson, 20 from Ilkeston is the latest addition to WKM Accountancy services. The steady growth of our company has led to a need to expand our team. Kayleigh is learning all the ropes of being an Account assistant during her one year placement and working toward earning her level 2 diploma in business administration. Her day to day tasks will include writing blog posts, managing social media, administration and bookkeeping.

Commenting on her new position Kayleigh said, “I am thankful for this great opportunity and have already learnt so much in such a short space of time. I am gaining new skills and knowledge every day. I look forward to contributing more in the months ahead.”

Mariah Tompkins, Managing director of WKM Accountancy Services said, “ We are pleased to welcome Kayleigh as part of our Team, the few weeks Kayleigh has been working with us she has shown a lot of commitments and very keen to learn, we feel Kayleigh will play a big part to our business expansion.

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How can I avoid accounting errors?

Modern technology has made accounting easier than ever before. However, accounting mistakes are still common; they can cost you money and even threaten the survival of your business. Here are some simple steps you can take to prevent various different types of errors being made:

Record everything

It sounds obvious, but it’s surprising how many business owners forget to record the small transactions. No matter how big or small your company, and no matter how insignificant those cash purchases seem, it’s vital to make note of them all. Forgetting transactions here and there can become a bad habit, potentially leading to your balance sheet being skewed. Get into the habit of being thorough and force yourself to record every single penny you spend.

Always set a budget

What happens when you go food shopping and don’t take a list? You end up buying items you don’t need and spending more money than anticipated! The same principle applies to accounting. You should set a budget for every project. This way you establish how much it should cost before you start. Without a budget, it’s tempting to keep spending that little bit more on a project to make it work, and this can lead to costs spiralling out of control. A budget keeps you disciplined.

Reconcile regularly

Checking that the number in your account matches the total amount you’ve actually spent is something else you should be doing regularly. If you’ve followed our first piece of advice, then your accounts are likely to be accurate anyway, but reconciliation is a useful error correction procedure that you shouldn’t neglect. Accurate statements prevent poor business decisions being made.

Appoint someone who knows what they’re doing

Many small business owners take on the accounting themselves in addition to all their other duties. While this might seem a good way to save money, it’s not always the best option. Accounting is time consuming and not everyone has a knack for it. Appointing a professional ensures a higher level of accuracy and let you focus on other areas of your business.

Keep your personal and business accounts separate

Forgetting to set up a separate business account is another typical error. You don’t want important business transactions mixed up with your grocery shopping. Keep them separate and it makes balancing accounts far easier.

Make use of technology

As we said at the start of this post, technology means accounting is easier than ever before. Yet many business owners are put off by their lack of knowledge of accounting software and stick to more laborious traditional methods. You don’t have to invest in the most expensive, most complicated, most sophisticated piece of software. Nevertheless, you should learn how to use accounting software (perhaps with a free trial) and use it to your advantage.

Know the difference between profits and cash flow

Whenever you close a deal, your natural instinct might be to record the income in your accounts straight away. However, be careful! All that profit doesn’t become cash in hand for you to spend straight away. Not being aware of the difference between profits and cash flow can make your business seem healthier than it really is and leads to overstatement.

Accounting errors here and there will inevitably happen at some point. However, you can avoid significant accounting mistakes simply by establishing good habits and being thorough. Good practices applied consistently will have positive outcomes for your business.

Laptop and calculator

Happy tax year (payroll updates)

Changes to tax codes and personal allowance are as follows:

From 6th April 2017, the personal allowance will go up to £11,500.

As for tax codes, here is the latest update:

  • Tax code ending in L add 50 to obtain the current tax code (i.e. 1100L will become 1150L
  •  Tax code ending in N ( you will need to add 45)
  • Tax code ending in M (You will need to add 55)
VAT Flat Rate Scheme

VAT Flat Rate Scheme change

From 1st April 2017 there will be a new 16.5% VAT flat rate for businesses with limited costs.

When the VAT Flat Rate Scheme was first introduced its intention was to reduce the burden of paperwork on small businesses. From April 2017 businesses must determine whether they are a limited cost trader. Companies will be classed as a ‘limited cost business’ if their cost of goods is less than either:

  • 2% of their turnover. The goods will be exclusively for business purposes but exclude: capital expenditure, food and drinks for staff, vehicles, vehicle parts and fuel
  • £,1000 per year 

What to do if you fall under the new ‘limited cost business’ flat rate VAT:

  • If you are already on the flat rate scheme, you need to check if the new rules apply to you and if they do start using the new rate as from 1st April 2017.
  • If your turnover is below the VAT threshold from April 2017 (£85,000) and you don’t expect to go above this moving forward you might need to consider de-registering for VAT.

If you are still unsure whether your business is affected by the new rules, please feel free to contact us for further assistance.

Pound coins

What does the 2017 Budget mean for you?

The Chancellor delivered the Budget yesterday (March 9), with a number of announcements affecting businesses, working parents and the self-employed. Here are a few at-a-glance key points:

Making Tax Digital (MTD)

Landlords and small businesses (unincorporated businesses) below the VAT threshold of £83,000 will have plenty of time to prepare for MTD as this has been postponed until April 2019, after which it will become mandatory.

Tax

Corporation Tax will be reducing to 19% from April 2017 and it will fall again to 17% by 2020. The self-employed will face an increase in tax with class 4 NI rising from 9% to 10% in April 2018 and 11% in 2019. The abolition of Class 2 NI will go ahead in April 2018. Read more about Corporation Tax and how you can pay it here. Update: The Chancellor has since dropped plans to increase NI rates for the self-employed.

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We got covered in the press!

Christmas is less than two weeks away, but there’s no signs of WKM Accountancy Services slowing down yet – as others are winding down, we’re working hard to help businesses get their finances in order for the new year, and submit their self assessment tax returns before January 31.

If you’re looking for some advice on how to plan for 2017, then check out this piece that we recently wrote for Real Business, with top tips including: Review your business plan, set some new goals, reconsider your accountancy software and keep up-to-date with changes in the law.

Real Business article

Annual Return Abolished from 30th June 2016

From 30th June 2016 the companies annual return will be abolished and replaced with confirmation statement.  (This is a way of providing an up to date information to companies house) It is also important to note that PSC information must be included as part of the confirmation statement.

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Tax Codes from 6th April 2016

Here is a useful resource I would like to share regarding the tax codes to use from 6th April 2016. This pdf has been put together by Gov.uk.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/497220/P9X_2016_.pdf

If you have any queries regarding the tax codes for this year or would simply like some help with your accounts, please do contact us today and one of our team members would be more than happy to help. Call us on 0115 8240555 or email info@wkm-accountancy.co.uk.

budget 2016

Budget 2016 Summary: Important changes affecting your business

The Budget announcements that happened in March have left many of us with mixed emotions and some unaware of what it means for their business. Here is a simple breakdown of the Budget 2016 and the relevant key points that could or will affect your business this year.

Dividend tax changes

New £5,000 tax free dividend allowance is to be introduced with increased rates of dividend tax thereafter.

Personal Allowance

The amount an individual can earn before having to pay income tax is increasing to £11,000 and we expect this to rise to £11,500 in April 2017, according to an announcement made by George Osborne.