• JOHN H.F. KING

    CHARTERED CERTIFIED ACCOUNTANTS

    We are a small firm specialising in giving advice to small to medium sized owner managed businesses.

    We aim to ensure that all clients receive a friendly personalised service relevant to their needs.

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13-02-2019
Gifts out of disposable income

There is an annual Inheritance Tax exemption of £3,000 for gifts. This exemption can also be carried forward to the following tax year if not used to make a maximum gift of £6,000. You can also give unlimited individual gifts of up to £250 per person during the tax year, but only if you haven’t used another exemption on the same person. There are additional, special allowances for gifts made at a wedding or civil ceremony.

Use the following relief to exempt regular financial support to your family

It is also possible for wealthier taxpayers to make tax exempt gifts and payments that are paid as normal expenditure out of income. This is a very flexible exemption from IHT as there are no specific requirements such as having to make fixed regular gifts to the same person. With proper planning this can be a very useful tool. For example, to enable grandparents to help pay school fees for their grandchildren.

However, careful consideration has to be given to ensure that these payments form part of the transferor’s normal expenditure and is made out of income and not out of capital. The person gifting the money must ensure that they are left with enough money to maintain their normal standard of living out of their regular income after making the gift.

If you are unsure if your family arrangements are covered by this relief from IHT, please call for further advice.

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13-02-2019
What work is covered by the CIS scheme?

The Construction Industry Scheme (CIS) is a set of special rules for tax and National Insurance for those working in the construction industry. Businesses in the construction industry are known as 'contractors' and 'subcontractors'. Under the scheme, contractors deduct money from subcontractors' payments and pass it to HMRC.

Contractors are defined as those who pay subcontractors for construction work or spent an average of more than £1m a year on construction over a three-year period. Subcontractors do not have to register for the CIS, but contractors must deduct 30% from their payments to unregistered subcontractors.

The alternative is to register as a CIS subcontractor where a 20% deduction is taken or to apply for gross payment status, where the contractor will not make any deductions and the subcontractor is responsible to pay all their tax and National Insurance at the end of the tax year.

The CIS covers all construction work carried out in the UK, including jobs such as:

  • site preparation
  • alterations
  • dismantling
  • construction
  • repairs
  • decorating
  • demolition

Exceptions to the definition of construction work includes professional work done by architects and surveyors, carpet fitting, scaffolding hire (with no labour) and work on construction sites that’s clearly not construction. The CIS does not apply to construction work carried on outside the UK.

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13-02-2019
When do you pay Capital Gains Tax?

Capital Gains Tax (CGT) is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. However, if you only pay basic rate tax and make a small capital gain, you may only be subject to a reduced rate of 10%.

Once the total of your taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT. A higher rate of CGT applies (18% and 28%) to gains on the disposal of residential property (apart from a qualifying principal private residence). There is an annual CGT exemption for individuals of £11,700 for the current tax year and this will increase to £12,000 from 6 April 2019.

The usual due date for paying any CGT you owe to HMRC is the 31 January, following the end of the tax year in which a capital gain was made. This means that CGT for any gains crystalised before 6 April 2019 will be due for payment on or before 31 January 2020. However, if you waited until the start of the next tax year, you would have until 31 January 2021 to pay any CGT due. At the extreme end of the scale, you could benefit from an extra whole year to pay any CGT due just by waiting to crystallise a gain from the 5 April 2019 (2018-19 tax year) until the 6 April 2019 (2019-20 tax year). 

The usual way to report a gain is to complete the relevant sections of your Self Assessment tax return.

Reduction in payment period to 30 days

There are existing special payment and reporting requirements if you live abroad and sell a UK residential property and you must inform HMRC within 30 days of the sale. The notification must be made whether or not there is any non-resident CGT to be paid. Any non-resident CGT that is due must also be paid within 30 days of the conveyance date. There are penalties for late payment and we would strongly advise that you monitor any CGT due and ensure the relevant payment deadlines are met.

These changes will also apply to UK-residents from April 2020 if there is CGT to be paid on a residential property sale.

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