Changing tax legislation
The new dividend and interest taxation rules introduced in 2016-17 moved the goal posts quite dramatically when it comes to: remuneration planning; the tax benefits of incorporation; and calculating and comparing overall tax liabilities for individuals with a range of income sources.
To help accountants and tax advisers show their clients how much tax and NIC would be due in any given situation, Tim Good developed three tax planning Apps:
- Taxpert Tax Calculator
- Taxpert Profit Extractor
- Taxpert Incorporation
These Apps let you change the salary, dividend, interest and other income and reliefs to let you see the effect on overall net income. Alternatively, you can work backwards from a profit figure to work out how much dividend could be taken or work out which year would be the best for a bonus payment.
Following on from the success of these first Apps, and based on the changing and complicated tax calculations for company cars and pensions, Tim went on to develop the:
All of Tim’s Taxpert Apps have been written from scratch with the client needs of those advisers using them in mind. With over 30 years of experience explaining and demonstrating tax changes, Tim is ideally positioned to produce accurate, relevant and reliable software. HMRC themselves rely in part on Tim to identify and tell them about scenarios where the HMRC software miscalculates the tax liability.
Each Taxpert App gives you complete flexibility of input and access to the detailed calculations behind the results.
An overview of the functionality of each of our Apps, together with worked examples are shown below:
Taxpert Tax Calculator
Our Tax Calculator App lets you input a client’s income figures so that they can see the resultant tax, NIC and net income figures.
The Tax Calculator also allows you to:
- correctly allocate tax reliefs and allowances to minimise tax liabilites;
- show what the 2019-20 HMRC self assessment calculator gets and highlight any differences with the App's calculations;
- see the property rental screen to show the effect of the finance cost restriction;
- generate a tax report to show to your client;
- determine the 2020-21 dividend required to give the same net income as 2019-20 using the equalise function.
The App also supports Scottish taxpayer calculations.
Taxpert Tax Calculator in action
- A director draws a salary of £5,250, dividends of £37,000 and has interest income of £8,000. The HMRC software calculates the 2019-20 tax as £2,644. The Taxpert Tax Calculator allocates the personal allowance in a better way and makes the tax £2,331.
- A partner has trading profits of £39,900, interest income of £39,000, dividends of £6,400 and qualifying loan interest payments of £35,250. The HMRC software calculates the 2019-20 tax as £6,010. The Taxpert Tax Calculator allocates the allowances and reliefs in a better way and makes the tax £5,472.
Why use Taxpert Tax Calculator
The Tax Calculator saves you from having to reinvent the wheel when it comes to calculating the likely tax liabilities of different scenarios for your clients. Unlike some tax planning tools, our App shows you the correct tax liability for the HMRC exclusion cases relating to income, dividends and interest. You can have total confidence in the accuracy of the tax figures you show your clients. Indeed some of our users automatically use the Tax Calculator to compare its figures against those produced by their primary tax and accounting software.
The main benefit of the Tax Calculator is being able to show your clients the tax consequences of different income and tax relief strategies. This, along with providing the full workings for each calculation, allows them to make reasoned decisions when presented with different scenarios.
Taxpert Profit Extractor
Our Profit Extractor App shows your clients how much salary, dividends or interest they can take out of their businesses. The Profit Extractor App lets you:
- input profit and other details for the 2019-20 and/or 2021-21 tax years;
- calculate the net incomes for different profit extraction strategies with the 'Optimise' function automatically calculating the optimal strategy based on your client's circumstances;
- see the effects of the 2021-21 changes to NIC thresholds;
- calculate the 2020-21 dividend required which will give your clients the same net income as 2019-20;
- make the above calculations for Scottish taxpayers as well.
Taxpert Profit Extractor in action
- Joe is a sole director shareholder and his company will make about £80,000 profit in the year to 31 March 2021. The optimum profit extraction is for Joe to pay himself director’s fees of £9,500 and a dividend £57,025 giving him net income of £58,492.
- Bella is the same as Joe except that she has financed her company with a loan of £100,000. If the company pays Bella interest of £6,000 and director’s fees of £9,500 she can have a dividend of £52,165 and she will have net income of £59,674 - £1,182 more than Joe!
Why use the Taxpert Profit Extractor
The Profit Extractor has been designed to provide a simple way to show your clients the most tax efficient ways of remunerating themselves from their businesses. It can demonstrate quickly and clearly how clients can maximise their income, whilst showing the tax consequences of applying different salary versus dividend strategies. The App provides the full workings for each calculation and, as with all other Absolute Apps, you can be confident in the tax figures that you are showing your clients.
The Incorporation App sets out the financial consequences of being a sole trader versus a limited company. It enables business owners to quickly see if they should incorporate and if they do, what monies they can extract from the business. In doing so, it lets you:
- input the trading profit and other income details for 2021-21;
- calculate the net income if trading as a sole trader;
- calculate the net income if trading through a company;
- identify the optimal income mix using the App's 'Optimise' function;
- see the overall savings from incorporation, where appropriate;
- show the calculations for Scottish taxpayers.
Taxpert Incorporation in action
- Morag is a sole trader with profits of £75,000. As a Scottish taxpayer her net income for 2020-21 will be £51,405. If she incorporated and took a salary of £9,500 and the rest as dividends her net income would be £55,758 and she is better off by £4,354.
- Billie is a sole trader with profits of £75,000. As a non-Scottish taxpayer her net income for 2020-21 will be £53,196. If she incorporated and took a salary of £9,500 and the rest as dividends her net income would be £55,758 and she is better off by £2,562.
- If Billie is over the state pension age then incorporating would make her worse off by £1,742 whereas if Morag was over the state pension age incorporating would make her better off by £50!
Why use Taxpert Incorporation
Our Incorporation App is a great way to show clients whether they are better off being a sole trader or a limited company. As well as having the confidence in the tax figures which you show to your clients, the App gives you the full workings of the calculations. It is an easy way to show clients the tax consequences and implications for the different business structures.
Taxpert Planning Apps – they’re brilliant, but don’t just take our word for it!
From a recent Absolute Apps customer survey, over half of our Taxpert Calculator customers used their Apps at least monthly and over 90% said their Taxpert Apps were easy to use.
Feedback from some of our Apps users includes:
“It's a really easy way to quickly run different scenarios for clients. (The Apps greatest strengths are their) ease of use, along with the technical knowledge of Tim Good and Team and knowing you guys have a direct line to HMRC.” – Neil Whittingham, NR Barton
“Simple to use and (you) don't have to enter the client's information, i.e. personal details to use them.” – Liz Mills, Langers
“(I) just love the planning ability of the Taxpert Tax Calculator.” – Andres Franklin, FCA UK Ltd
“(The Apps greatest strengths are) the re-assurance they give (that our) software has dealt with certain scenarios correctly. It is often correct over other software.” – Steven Griffen, Plummer Parsons
“For the price these are the best pieces of tax software I've ever had the pleasure of using.” – Robert Shadbolt, Shaw Gibbs Ltd
For just £199 plus VAT you will have access to all three of the above calculator Apps on a single user basis.
For just £99 plus VAT you can buy any one of the three Apps on a single user basis and then add any of the other four Apps for an additional £50 plus VAT each (including our Company Car Planner and Pencon Tool).
Our Apps will run on all versions of Excel but please note that some users of old versions may not be able to run the optimise feature which depends on the Solver add-on. This does NOT detract from the use of the App for advising clients on the tax and NIC consequences of different income combinations.
The multi-user licence allows use on up to 5 machines. If you require a licence for more than 5 machines please contact us on 01869 255797 or firstname.lastname@example.org.
For further information on this product please give us a call on 01869 255797 or contact us here.
> Download a free trial of Taxpert Tax calculator
> Download a free trial of Taxpert Profit extractor
> Download a free trial of Taxpert Incorporation
> Download a free trial of Company Car planner
> Download a free trial of Pencon Tool
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