Pay as You Grow: Help for Bounce Back Loan Borrowers

Makinson blog - Pay as you Grow scheme

Last month the government announced the Pay as You Grow scheme. The aim of the scheme is to help businesses who have signed up for a Bounce Back Loan. Here’s a look at what it is and how it can affect you.

It became very clear very quickly how badly the pandemic affected many businesses last year and continues to do so now. Back in May 2020, the Government launched the Bounce Back Loan Scheme. This scheme allowed businesses negatively affected by COVID-19 to borrow between £2,000 and £50,000. The amount they were able to borrow was based on their turnover, with an interest of 2.5% per annum.

Loans were offered by accredited lenders such as banks, with a 100% guarantee from the Government. The original terms for the Bounce Back Loan were that businesses wouldn’t need to start making payments for the first 12 months, with no interest payable for this period either. Following this, the loan would last for 6 years.

In response, more than 1.4 million businesses took out nearly £45 billion in loans through the scheme. Despite this, many businesses are still struggling due to the repeated lockdowns and continuing restrictions.

However, last month (February 2021) in was announced that a new scheme would be launched to help businesses with their repayments. Called the Pay as You Grow scheme, it offers borrowers more flexibility to repay their loan.

How Does the Pay as You Grow Scheme Work?

The aim of the Pay as You Grow scheme is to offer more flexibility and to help more businesses survive the pandemic. It does this in 3 main ways:

  • The option to extend the length of the loan from 6 years to 10 years
  • The ability to make interest-only payments for 6 months. This can be used up to 3 times throughout the loans duration
  • The option to pause repayments completely for up to 6 months

How Could the Pay as You Grow Scheme Affect You?

Firstly, the Pay as You Grow scheme will significantly help ease pressure on cash flow. The option to increase the length of the loan to up to 10 years will nearly half your monthly payments.

Additionally, having the option to make interest-only payments for six months would further lower the impact on cash flow and bank balance.

Before you decide that this is the best option for you, you should also consider potentially negative impacts. Extending the loan length to 10 years may help your cash flow, but it could result in you paying more interest. Even if you opt for putting off loan repayments for another 6 months, interest will still start 12 months after you took out the loan.

How Can You Access the Pay as You Grown Scheme?

As part of the Government’s announcement in February, the Treasury stated that borrowers will be directly contacted by their lenders. This means that if you took out a Bounce Back Loan, your provider should reach out to you to discuss your Pay as You Grow options. They also stated that correspondence should only be expected three months before the first payment is due.

To summarise, if your business has a Bounce Back Loan, the Pay as You Grow scheme could be for you. It could be particularly helpful if you are concerned about your loan repayments. Pay as You Grow will give you many options to ease the pressure that repayments may have on your business’ cash flow.

You can find the Government’s announcement of the Pay as You Grow scheme on the website. It is important to note that even if you haven’t yet taken out a Bounce Back Loan, you still have until March 31st 2021 to do so.

As experienced accountants, Makinson & Co are always here to offer professional advice. Should you have any concerns or questions regarding your own finances we’re here to help. You can easily contact us using our online contact form, or by calling us on 01594 842 188

HMRC: New scheme for 2020 VAT Deferrals

Makinsons Blog Header February 2021 - VAT Deferral New Payment Scheme

The announcement of the VAT Deferral New Payment Scheme will be a relief for many businesses. Here’s a look at what it is and what it means for you and your business.

The pandemic affected most businesses last year. Due to this the UK Government announced a scheme to allow businesses to defer VAT payments. This deferral scheme meant that any payments due between 20th March 2020 and 30th June 2020 could be deferred until 31st March 2021.

Now, HMRC has announced that over half a million businesses who took advantage of these payment deferrals can now join a new scheme that will allow them to pay it back in smaller amounts.

This new scheme is part of a larger support package that the Government is using to help protect millions of jobs and businesses during the pandemic. This package of support is worth over £280 billion and so far, £34 million has been invested into the UK economy. The new payment scheme for VAT deferrals, along with this wider support package will help the UK economy to continue to recover.

To join the new online VAT Deferral New Payment Scheme, businesses will need to have deferred payments from between March 2020 and June 2020 under the original VAT Payment Deferral Scheme. If they do, they will have the opportunity to pay their VAT in equal instalments from March 2021. They will need to opt-in to this new payment scheme and can do so via the online service which opened on 23rd February and will close on 21st June 2021.

How do the instalments for the VAT Deferral New Payment Scheme work?

If you decide to opt-in to the VAT Deferral New Payment scheme, the maximum number of instalments will be determined by the month that you join the scheme. For example, if you join the scheme in March 2021, you will be able to pay your deferred VAT payments in a maximum of 11 instalments. You can view the maximum instalments for each month in the table below:

If you join by:Maximum number of instalments available to you:
19th March 202111
 21st April 202110
19th May 20219
21st June 20218
*please note that the specific date for each month is to allow for Direct Debit processing

How do you join the VAT Deferral New Payment Scheme?

To join the scheme, you will need to have a Government Gateway Account. You will also need to submit any outstanding VAT returns from the past 4 years. This step needs to be done otherwise you won’t be able to join the scheme. Errors will also need to be corrected on your VAT returns as soon as possible and you need to make sure that you know exactly how much you owe, including the amount you originally deferred and the amount you have already paid towards it. The deadline to join the scheme is 21st June 2021 and you will be required to pay the first instalment when you join.

What happens if you don’t join the new scheme?

The VAT Deferral New Payment Scheme is one of the options for businesses that still have deferred payments outstanding. The other option is to pay the VAT that you have deferred on or before the 31st March 2021. You can also get in contact with HMRC to discuss extra help that might be available if you need help paying. You would need to do this before 30th June 2021.

It is worth noting that you could be charged interest on your deferred VAT if you either don’t pay your deferred payments in full by 31st March or don’t agree to help from HMRC by 30th June.

If you need any help with your VAT returns or signing up for the VAT Deferral New Payment Scheme, we can help. Our team at Makinson & Co has extensive experience with business accounting and we will do what we can to make the process easier for you.

Self-Assessment Tax Return Deadline: Waiving of late filing fines

The deadline for filing your self-assessment tax return for the tax year 2019/2020 is this Sunday (31st January). However, the Government have announced that if you file your self-assessment late, you won’t receive the usual £100 fine. This is as long as you do still file it before 11:59 pm on 28th February. Please note though that you will still be fine if you don’t pay your bill before the 31st January deadline.

Who needs to submit a self-assessment tax return?

The majority of UK taxpayers will be full-time employees who have their taxes automatically deducted when they receive their wages. If this applies to you, you don’t need to worry about filing a tax return. However, if you are an individual or business who doesn’t automatically have your taxes deducted or you have earned undeclared income, you need to submit one.

To be a bit more specific, if the any of the following apply to you during the 2019/2020 tax year, you need to submit a tax return:

  • Income was received from a trust
  • Capital gains tax needs to be paid
  • Your income was more than £1,000 whilst self-employed
  • You had an income of more than £50,000 and you or your partner claimed child benefits
  • £10,000 or more was earned by you before tax on from savings, dividends, shares or investments
  • If your state pension was more than your personal allowance. This is if it was your main source of income (only if you started receiving your pension before April 6th 2016)
  •  More than £2,500 was earned from renting out a property, or from other untaxed sources such as tips or commission
  • Income was earned abroad
  • Earned a UK income whilst living abroad
  • If you have been told by HMRC that you didn’t pay enough tax in the previous tax year (and this hasn’t been done through your tax code)
  • If you filed a self-assessment tax return last year (unless HRMC have told you that you don’t need to

Remember to register for your tax return

To file your self-assessment, you’ll need to register first. Although the deadline for this was October 2020, you’ll generally be okay doing this now if you haven’t already. You’ll need to do this ASAP though as it can sometimes take up to 10 working days to get your reference number.

You can register on the Government’s website.

Recover an old log in

If you have registered before but don’t remember your login details, you can retrieve your ID if you normally log in with the Government Gateway.

If you log in using the Verify method and you forget your details, you’ll need to contact the provider that you use to log in, such as the Post Office, Barclays or Experian. You can find more information about Verify on the website

What if I need some advice about my tax return?

If you need and advice with your self-assessment tax return, our team at Makinson & Co can help. We have extensive experience in helping a range of clients with their tax returns. We know that it can be stressful trying to submit it on time. This makes it even harder to make sure it’s perfect, which is extremely important. If you need any help with your personal tax returns, contact us and we would be more than happy to assist you.

What is Inheritance Tax (IHT) and do I have to pay it?

Makinson December 2020 blog - Inheritance tax

Inheritance tax is a tax on the estate of someone who has passed away. Their estate includes all property, possessions and money.

This can result in your loved ones paying hundreds of thousands in tax when you die. However, there are ways you can mitigate this if you plan correctly. How much is paid depends entirely on the value of your assets as well as other factors.

Assets include:

  • Cash in the bank
  • Investments
  • Property
  • Businesses
  • Vehicles
  • Life Insurance policies

A helpful guide on what Inheritance Tax is can be found below.

Who must pay Inheritance Tax?

There is usually no tax to pay if:

  • The total value of your estate is below the nil rate band of £325,000 or
  • You leave everything above this threshold to your spouse or civil partner or
  • You leave everything above this threshold to an exempt beneficiary e.g., a charity

 If none of the above applies, then your beneficiaries will be taxed at 40% on anything above £325,000. However, the threshold may be higher depending on individual circumstances – which we will explain more of below.

What if my spouse is deceased?

If you will not be passing your estate to your spouse because unfortunately, they have passed away, then you will have their NRB (nil rate band) allowanced added onto yours. This means you have a IHT free allowance of £650,000.

What if I own my home?

For homeowners there is another allowance called the residence nil rate band. This is commonly referred to as ‘main residence band’. To access this, you need to leave your main property to a direct descendant.

Who classes as a direct descendant:

  • Children and their spouses or civil partners
  • Grandchildren and their spouses or civil partners
  • Stepchildren
  • Adopted Children
  • Foster Children
  • Children who were under the guardianship of the people passing on their estate.

However, if your total estate is worth the £2 million, the additional allowance tapers off. Falling by £1 for each £2 above the threshold.

If you are married, you have double the residence nil rate band allowance. This means that from April of this year (2020) you can pass on as much as £500,000 tax-free, or £1m if you are married.

More information on properties and IHT can be found here.

Are there any exemptions from IHT?

Yes, if the person who dies in active service then they are exempt from inheritance tax. Included in this are:

  • Armed forces personnel
  • Police
  • Firefighters
  • Paramedics
  • Humanitarian Aid Workers

What other ways can I reduce my tax bill?

Here are some ways you can look to reduce your inheritance tax bill:

  • Regularly giving away up to £3,000 a year in gifts
  • Putting your assets into a trust for your heirs
  • Leaving a legacy to charity (gifting a tenth of your wealth to charity reduces your tax to 36%)
  • Leaving your estate to your spouse of civil partner
  • Paying into a pension instead of a savings account

NOTE: If you do not give away £3,000 in one year, you can pass this over for one tax year only.
Also, if you wish to gift more than £3,000, you can do this but you must survive 7 years past the date of the gift for it to be exempt from IHT.

Did you know?

Wedding gifts can be inheritance tax-free. A parent can gift £5,000, a grandparent £2,500 and £1,000 from anyone else.

How much inheritance tax will I pay?

Which have provided a calculator which you can use to find out.

For more information on IHT and other taxes your beneficiaries may be subject to when you die, give us a call today and we can help.

01594 842 188