Running Tax Predictions in Free Agent?

[Fee Agent]

Hi all,

I'm using Free Agent for my online bookkeeping and am still in my first year with it so haven't seen the account being done for a full financial year.

On the main overview screen of Free Agent, you can see how much Corporation Tax is going to be due, based on the income the business has generated so far.

However, it doesn't take into account the two salaries from the two directors.

I assume they will be added at the end of the year by the accountant.

However, is it possible for this to be added at the start of the year, so that the Corporation Tax is more accurate?

So it would say something like (near the end of the year):
Income: £50000
Expenses (including salaries): £16000
Profit: £34,000
Corp Tax: £6,800

But also give a rolling/running prediction throughout the year.

I assume that is how the profit and tax is calculated.

Furthermore, is it also possible to get a running total of how much personal tax each director would pay in Free Agent?

So after the Corp Tax, there is £27,200 left, which would then be split 50/50 by the two directors at £
£13,600 and would be taxed at whatever the rate is for that type of dividend.

Can Free Agent handle dividend tax as well as corporation tax? What about student loans?

Thanks!

 

[Scalloway]

How do you deal with the salaries at the moment?

 

[Chart Accountancy]

Is your accountant a certified FreeAgent partner? If yes, they should help you with setting up the salaries in FreeAgent. If the accountant files the RTI outside FreeAgent, the payroll profile can be set up in FreeAgent but with no submissions, this will include the salary in the profit calculations. The self assessment taxes for directors set up as users in FreeAgent are calculated under the section Taxes>Self-assessment.

 

[Fee Agent]

How do you deal with the salaries at the moment?

They are just coming straight out the business bank account into the personal account and I'm marking them as Money Paid to User > Payment from Director Loan account.

Is that OK?

Is your accountant a certified FreeAgent partner? If yes, they should help you with setting up the salaries in FreeAgent. If the accountant files the RTI outside FreeAgent, the payroll profile can be set up in FreeAgent but with no submissions, this will include the salary in the profit calculations. The self assessment taxes for directors set up as users in FreeAgent are calculated under the section Taxes>Self-assessment.

I'm not sure, they recommended I switched to FreeAgent from my previous system.

When it includes the salaries in the profit calculations, is that just at the end of the year or throughout the year, on an on going basis?

Thanks, I've had a look at the Taxes>Self-assessment section.

I won't fill it in now as will speak to my accountant about how they want to handle it.

Looks like it covers everything! Once it's filled in, will it start displaying the expected tax and student loan due on an on going basis?

My main worry is that we're going to get a surprisingly high tax bill so I'm hoping Free Agent can be set up to give a realistic prediction at any point during the year.

My personal tax year is April to April but the business accounts run from November to November. Is this going to make it difficult to predict both taxes accurately?

Thanks for all your help!

 

[Scalloway]

They are just coming straight out the business bank account into the personal account and I'm marking them as Money Paid to User > Payment from Director Loan account.

Is that OK?

That is not you paying a salary. The company is lending you money.

You should be running a payroll through Free Agent. That will do all the calculations, post the entries to the salaries account, work out your personal tax and tell you what to pay HMRC.

My personal tax year is April to April but the business accounts run from November to November. Is this going to make it difficult to predict both taxes accurately?

The company tax year has nothing to do with your personal tax year. The company should be paying you through PAYE. Free Agent should do all your personal tax calculations and tell you what to pay HMRC.

Corporation Tax estimates will be based on the company's income and expenditure. Your gross salary done through PAYE is a legitimate deduction from profit.

 

[Fee Agent]

That is not you paying a salary. The company is lending you money.

Right, OK. That doesn't sound right/good.

I'll have to look into what this means.

Thanks