A new VAT estimator and 5 other useful tools from HMRC

HM Revenue & Customs (HMRC) has been developing numerous new tools in a variety of areas to help individuals and businesses manage their tax obligations.

We often recommend these to clients who need a quick view of their liabilities and an easy way to see how much they’re going to pay in taxes.

(All links to the HMRC tools are included at the end of this article).

However, it should be noted that these tools only provide a brief overview – a snapshot – of your liabilities and you should always speak to an accountant for a more detailed breakdown of how much tax you need to pay.

With that said, here are the HMRC tools I recommend and why:

1. The new VAT registration estimator

Essentially, HMRC’s newest tool helps businesses estimate the impact of registering for VAT on their finances.

It provides insights into when a business might need to register for VAT and the potential effects on profits.

Bear in mind that your business must register for VAT if:

Your VAT taxable turnover for the past 12 months exceeds £90,000 (this was £85,000 until 31 March 2024).
You expect your turnover to exceed £90,000 in the next 30 days.
You run an overseas business supplying goods or services to the UK (or expect to in the next 30 days), regardless of your VAT taxable turnover.

Helpfully, the new VAT tool also links to additional resources about the VAT registration process which is always useful.

Again, you should always discuss this with your accountant as the tool does not provide you with the entire picture and may miss important details.

2. The Income Tax tools

Fundamentally, there are two tools I suggest you use to work out a rough estimation of your Income Tax liabilities:

Check Your Income Tax
Estimate Your Income Tax

The first allows you to check your tax code, Personal Allowance, and estimated Income Tax for the current year.

It also enables users to update their income details and see if their tax code has changed.

The second allows you to estimate your Income Tax and National Insurance contributions for the current tax year.

This tool is especially useful for those on Pay-as-you-Earn (PAYE) and provides take-home pay calculations.

3. The National Insurance tools

There are two tools I usually recommend when it comes to National Insurance, each for a different employment circumstance:

The National Insurance Contributions Calculator
The Director’s National Insurance Contributions Calculator

As you might imagine, the first tool helps employees calculate their National Insurance contributions and, if you’re a business owner, how much you need to deduct at source from your staff members’ pay cheques.

However, other aspects go into the payroll process, including student loan and child maintenance deductions so it’s not as simple as just using the calculator.

The second tool is specifically for company directors to check their contributions.

4. The PAYE Tools

HMRC offers a suite of tools for employers to manage payroll, including calculating PAYE tax and National Insurance contributions, statutory payments like maternity and sick pay, and generating P60s and P45s.

There’s even a tool on the HMRC website that helps with company car considerations and calculates the tax charge based on a car’s taxable value and CO2 rating.

Equally, the Statutory Sick Pay Calculator helps you work out statutory sick pay for your employees.

5. Self-Assessment Tools

For those of you who are self-employed, HMRC offers two key tools which I recommend you check out:

The Self-Employed Tax Calculator

The Work Out Your Transition Profit tool

The first estimates the Self-Assessment tax bill for self-employed individuals and the second is for calculating transition profit for those affected by the new tax year basis.

The tax and liability calculations for the self-employed are, in many ways, more complicated than for some large businesses and to further muddy the water, it’s often you that has to manage your own compliance.

However, we handle tax filing for many of our clients and would be happy to help you manage your Self-Assessment this year.

6. The HMRC App

Essentially, the HMRC app offers many of the same functionalities as the other online tools and provides a convenient way for users to manage their tax details on the go.

You can check your tax code, estimate tax payments, and access your personal tax account via the app.

All of the tools listed above are designed to simplify tax management and provide clear guidance on various tax-related issues, helping both individuals and businesses stay compliant with HMRC requirements.

However, the HMRC tools will never be able to provide you with advice on reducing your liabilities and staying compliant in the same way as an accountant.

Yes, they provide you with a basic overview, but they don’t offer you the same protection that a qualified and experienced tax adviser does.