Tax

During this month’s Facebook Live, I talked about communication and why it is important.

As a business owner, when you are running a business, whether it’s selling products or providing services, it is extremely important that you communicate regularly with your customers.

It will depend on your particular business, what type of communication you need to have with customers, and how often.  You should always be clear and concise in all communication, especially in contracts.  Make sure that the contracts state clearly what services/products are being provided, the costs and payment terms.  It’s also helpful to include information about late payments and any termination clauses.

You also want to ensure that you make it clear what is your preferred method of communication – for example, e-mail only or calling a specific telephone number.  It is also important to make customers aware of your hours of operation and the length of time it will take for you to respond.

Whether you are self-employed, or have staff, if you (or a member of staff that deals directly with customers) is going to be away for more than a day, give plenty of notice to your clients and let them know if there is someone else that they can contact if they need to.

I’ve touched on some of the key items about communication from a business owner’s perspective, so now I’m going to talk about it from a client’s perspective.

As a client, you have a responsibility to communicate with your suppliers that are providing you with products or regular services – like a bookkeeper or accountant.  It is important that you communicate with them and provide them with the necessary information in a timely manner to complete your accounts.  Without that information, your accounts cannot be completed meaning you won’t have an accurate picture of your business.  It can also affect your ability to grow your business and you might miss any legal deadlines which would put you at risk of being fined by HMRC or Companies House if you are a limited company.

If you are going to struggle to pay an invoice on time, contact your supplier straight away to avoid any late payment fees.

Without communication, your business will not succeed.  You need to ensure you are communicating with your customers, your staff, your suppliers, and any other person or business that you encounter.

Ensuring that the information you provide to the public is clear, concise, and accurate will help you to grow your business and achieve your goals.  Make sure that your website is kept up to date with information about the business – contact details, the products, or services you provide, and members of staff if you have any.  By communicating with people, you will build relationships based on trust and that will lead to getting customers.

I have personally noticed that in the last few years, especially through covid, a lot of the infrastructure for communication has become sporadic – and that’s across all sectors – health, government, and education.  If accurate information isn’t provided to people in a timely fashion, it starts to cause doubt and confusion.

By ensuring that you communicate regularly with those you meet through your business, you will show them that you are trustworthy and that your business relationship with them is important.

As a bookkeeper, I know how important communication is.  I have a responsibility to my clients to ensure that they can meet their legal deadlines in terms of their accounts and to help them to understand the financial picture of their business.  However, I am not able to do this without being provided with the necessary information by the client to complete these tasks.  Even though MTD for Self-Assessment has been delayed, getting into good habits now of providing the information to your bookkeeper/accountant, or even you spending time on getting your accounts done on a weekly or monthly basis is a very good idea.  It helps you to have a better understanding of your business and it does reduce your stress in the long run as you won’t be worrying about what a transaction from 6 months ago was for.  You will have more control over your cash flow and be better prepared for any tax owed.

If you would like to talk about how to improve your communication within your business, please feel free to e-mail me.

During this month’s Facebook Live, I talked about what IR35 is and how it affects workers.

What is IR35?

IR35 is a rule which became law in 2000.  It is also known as the off-payroll working rules.  IR35 was put in place to stop workers (mostly contractors) from being able to work for a company as an individual when they are really an employee.  If someone falls under IR35, they are taxed at the same rates as if they were an employee.

Who does IR35 affect?

IR35 affects all workers, or contractors, who are not self-employed.  The workers will usually have their own company – it could be a limited company, partnership or individual – and they work through that company.

Someone could be working through a limited company and not be affected by IR35 – it all depends on the circumstances for each of the clients a business provides services to.

How do I tell if IR35 affects me?

The first thing to establish is whether you are definitely self-employed.  HMRC have drawn up several statements to help someone decide if they are self-employed.

In order to be classed as self-employed, most of the following statements need to be true:

• You put in bids or give quotes to get work
• You are not under direct supervision when working
• You submit invoices for the work you’ve done
• You are responsible for paying your own National Insurance and tax
• You do not get holiday or sick pay when you aren’t working
• You have a contract with each client that uses terms like self-employed, consultant or independent contractor

HMRC have an online checking system available that can help someone understand if they would be classed as employed or self-employed.  You can find the link to it on this page.

If HMRC are looking into whether you are truly self-employed or if you fall under IR35, they will look at all of the different factors and decide from there.  It is very important that any contracts you provide reflect how you work with your clients (ie you will be invoicing them for the work, whether you are being supervised by them, whether you get sick pay/holiday pay).

The next step is to look at the three key indicators that someone falls under IR35 or not.

1. Do you as the person providing the service, have the right to provide a replacement worker to carry out the contract if you are unable to do it yourself?
2. Is there an obligation on your client to provide you with the work and an obligation for you to carry out that work?  This is referred to as Mutuality of Obligations (MOO). 
3. Are you as the person providing the service in control of how the work is done, where it is done and when it is done?  The more factors that show that you as the service provider are the one that is in control, the more it will indicate that you do not fall under IR35.

There are other conditions that are looked at to help determine whether someone falls under IR35 or not and this includes things like who provides the equipment,

What happens if I do fall under IR35?

If after all the checks have been done, it is determined that you fall under IR35 (sometimes referred to as “inside IR35), you will be considered an employee of the client and will be subject to PAYE.  You will be required to pay the correct tax amounts for PAYE and National Insurance.  You will also have to declare on your tax return that you fall under IR35. There is guidance on the HMRC website about how to calculate the appropriate amount of taxes you need to pay if you are deemed to be under IR35.  You can access that page here.

If you are under IR35, the way in which you calculate your income is different.  You will not be able to claim all of the expenses a business is allowed to claim, as you are restricted to only being able to claiming a flat rate of 5% for general expenses, and any other expenses that are claimed can only be ones that employees are allowed to claim from their employer.  You can read about what those types of expenses are on the HMRC website. You are then allowed to claim capital allowances but only on any equipment that’s been bought that directly relates to the work you are doing and any pension contributions made to an approved pension scheme.

In terms of National Insurance, if you are under IR35, you will be required to pay Class1 and Class1a National Insurance contributions which are directly related to Employer National Insurance.  HMRC have further guidance on National Insurance contributions on its website.

As IR35 is quite a complex situation, especially when calculating the correct amount of tax that needs to be paid, I would advise that you have a bookkeeper or an accountant help you with filing your tax return and ensuring that the correct amounts are paid to HMRC.

If you would like further information about IR35, please feel free to e-mail me.

On March 15th, 2023, the Chancellor, Jeremy Hunt, announced several changes during the annual spring budget. A good portion of the announcements focused on childcare, but I will be looking at the announcements that will affect businesses in the UK.

1. All tax rates and allowances that were announced during the Autumn 2022 Budget have been confirmed and will stay the same.
   
   Personal Tax Rates:
   – basic rate of income tax for those in England, Wales and NI will remain at 20%
   – 45% higher tax rate will remain
   
   National Insurance Contributions will be paid by those who earn £12,570 or more
   
   Corporation Tax on profits of over £250,000 will increase from 19% to 25% with a marginal rate of 26.5% on profits between £50,000 and £250,000.
   
   
2. From April 1st, 2023 until March 31st, 2026, companies that buy new and unused plant and machinery will no longer use the “super-deduction” method announced in March 2021. Instead, they will be able to claim 100% first-year allowance referred to as “full expensing”. They will be able to claim 50% first-year allowance for special rate expenditure.
   
   
3. The 100% Annual Investment Allowance that is available to all businesses that buy assets have been confirmed at £1 million/year permanently.
   
   
4. The dividend allowance that exempts some dividend income from tax is being reduced from £2,000 to £1,000 in 2023/24 and then to £500 in 2024/25.
   
   
5. Increase in National Living Wage for those aged 23 and over to £10.42/hour from April 1st, 2023.
   
   
6. Capital Gains Tax – the annual exempt amount is being cut from £12,300 to £6,000 in 2023/24 and then to £3,000 in 2024/25. This reduction will mean more individuals will be required to file self-assessments due to needing to report chargeable gains.
   
   
7. The changes to Research and Development announced during the Autumn 2022 Budget will be included in the Spring Finance Bill 2023.
   
   Additional R&D Tax relief will be made available for R&D intensive SMEs that are eligible and these will take effect from April 1st, 2023.
   
   
8. VAT – to help the NHS, from May 1st, 2023, health care services provided by staff that are directly supervised by registered pharmacies will be VAT exempt. In Autumn 2023, zero-rate VAT will be extended to medications supplied via prescriptions through Patient Group Directories.
   
   
9. Investment Zones – The government will establish 12 investment zones across the UK. Each area will have to submit proposals and once approved the zone will be established. Each zone will be able to access special funding worth up to £80 million over a 5-year period.
   
   
10. The government will be looking at the tax system for small businesses and implementing a number of changes to make it easier.
    
    

This blog post only touches on some of the main highlights from the Spring Budget. You can read the full budget in full on the HMRC website here.

During this month’s Facebook Live, I talked about what different accounts software there is, how to find out what’s best for your business, and even some apps that can help make keeping your accounts more efficient.

There are a lot of different types of cloud-based accountancy software out there, and the public is constantly bombarded by ads about how they are so easy to use – “it’s just a click of a button”.  What those ads fail to explain, is that while there is some truth to just “clicking a button”, you have to have the knowledge of where to put the information.  Understanding where the information should go and how to enter it so that your accounts are accurate, and you aren’t over or underpaying your tax, will save you a lot of issues down the line.  I have seen things in the past where clients have recorded transfers of money from their main bank to the savings account as income which if I hadn’t spotted what they had done, could have resulted in them paying a very large sum of tax due to their income being overstated.

If you want to do the bookkeeping yourself, I urge you to get training on the software to help reduce any mistakes that could happen.

Some of the most common ones that people hear about are:

• QuickBooks Online
• Xero
• Sage
• FreeAgent

Several banks now also offer accounts software attached to the bank account – but these may not do everything you need software to do.

Which software should I use?

The software that someone uses is going to be down to personal choice.

Before you choose the software to use for your accounts, you need to understand what it is you need from the software:

• Do you need to track VAT?
• Do you need to track inventory?
• Do you need to record multi-currency?
• Do you need to be able to add additional information to the accounts and not just use the bank feed?
• Do you need to be able to track supplier invoices if you don’t pay them straight away?
• Is it compliant with the current guidelines – i.e., compliant for MTD for VAT?

Once you know what you need to be able to do with the software, you should then look at the following:

1. Do I have any systems in place already, like a CRM system such as Zoho, that can be linked to the accounts software?
2. If I sell my products/services through a website, can I link the website to my accounts software so it can get my sales data automatically?  If it can’t link directly to the software, are there any apps out there that will allow the sales data from the website to be imported into the accounts software?
3. What type of support comes with the software?  Is the support only available via e-mail or can you get telephone support?  Some of the accounts software only allow e-mail support.
4. What is included in the cost of the software?  If the software has different packages, what is available in each package?  Does a particular package provide you with everything you need to be able to do?  Are some of the fundamentals of keeping accounts, like reconciling, only available on some packages?
5. If I have a bookkeeper or accountant, am I able to get the software through them at a discounted rate?
6. If you don’t currently have a bookkeeper or accountant and decide in the future to get one, can they work with the software you are currently using?
7. If you have a bookkeeper or are going to be using a bookkeeper, will you even need to be able to do anything with the software (i.e., if you won’t be doing the actual bookkeeping work)?  You will want to ask the bookkeeper/accountant if it will provide you with the information that’s required to meet any legal obligations but to also be able to make informed business decisions.

One of the best pieces of advice I can give you about finding the right software for you is to play around with the software – on your laptop and on your phone/tablet – if they offer a free trial period.  This will give you an idea of whether the software is going to be something you are going to be happy with using.

With the advancements of cloud-based software, there are so many 3^rd party apps that can be used with different accounts software to help get the information from your existing systems into your accounts.  Not only that but there are apps that can help take the accounts software to the next level in terms of financial reporting or analysing cash flow and budgets.  The apps can help to improve your efficiency and grow your business.

Some of the most well-known apps are ones that can be used to capture purchase information – so being able to snap purchase receipts or manage your supplier invoices so that the information can be easily imported into the accounts.  AutoEntry, Dext, and Hubdoc are three of the most popular ones.  Personally, I use AutoEntry as it fits into my pricing structure and works well with QuickBooks Online.

One of my favourite apps is Excel Importer/Exporter by Saasant. It’s great for if you have a bespoke system that handles all of your sales/customers, and you need to get the information into your accounts.  You can download the information from your bespoke system in a CSV file, and then import it into the accounts using the app.  I use it for a few of my customers whose bespoke systems don’t have an app that can be used to get the information into the accounts.

I am also a fan of the apps that are by Intuit that work with Shopify and Etsy.  They can be a bit tricky and sometimes don’t import the information right (for example if a sale has been archived on Shopify before the transfer of information has taken place), so you do need to make sure you reconcile the information just like you do a bank account, but it really does make it so much easier to get the sales information in – especially if you are a VAT registered business and sell products as you are legally required to record your sales information on a daily basis.

When looking at 3^rd party apps, you need to do the same thing you have done for your account’s software – look at what it provides to you, what type of support is there, what are the costs, and whether it does what you need it to do.  Some apps do come with a trial period which allows you to try them out and see if it is going to be a good fit for your business.

You want to ensure that whatever accounts software you use, and any additional apps, are going to benefit you and your business.  They need to be able to help you make better-informed business decisions, improve efficiency, and help you to achieve your goals.

If you would like further information about how to find the right bookkeeping software for you or how to find apps that can help improve efficiency, please feel free to e-mail me.

During this month’s Facebook Live, I took things right back to the basics.  I talked about what a bookkeeper does and how they can help your business.

What is a bookkeeper?

In simple terms, a bookkeeper helps to keep the financial records of a business up to date and helps to prepare the accounts.  However, there is a lot more to it than that.

Keeping financial records for a business isn’t straightforward.  Even though the purpose is to record all sales and purchases for the business so that your tax return can be filed, businesses also need to know other information – like the total value of their business, how much money they are owed, how much money they owe to other people, the value of the assets of the business.  Without having a full financial picture of your business, you will not be able to grow your business and achieve your goals.

While you do not need to have a specific qualification to be a bookkeeper, it is a legal requirement that all bookkeepers are supervised by an approved body and comply with the Money Laundering Regulations.

How does a bookkeeper work?

Different bookkeepers will have different ways of working – some will go into a client’s office while others will work 100% remotely.  The advancement of cloud-based accounting software has meant that more and more bookkeepers are able to work remotely and have clients from a wider area.

Some bookkeepers may choose to work with a variety of software, while other bookkeepers will specialise and only use 1 or 2 types of software.  They will work with their individual clients to set up processes to share the information required to get the accounts completed within the agreed timeframes.

Your bookkeeper may only work on your accounts once a month or once a quarter, or they might even work on your accounts on a regular weekly basis depending on the size of your business.  Many businesses will only have a bookkeeper (or accountant) involved after the end of the financial year when the tax return is due.  By having your bookkeeper work on our accounts on a regular monthly basis, you will be able to access “real-time” information about the business and then be able to make better-informed business decisions in a timelier fashion.  The frequency you need your accounts done will depend on your specific situation – for example, if you are VAT registered and need to submit a VAT return every quarter, then it is extremely important that your accounts are completed on a regular monthly basis to ensure you do not miss the VAT submission deadlines.

If you have a bookkeeper, making sure that you provide the necessary information to them by the deadlines they have set, is extremely important.  Without the information being provided, your bookkeeper will not be able to keep your accounts up to date and ensure they are accurate.  It is a collaboration between the business owner and the bookkeeper – you are a team working together to ensure you are able to achieve your business goals.

How can a bookkeeper help my business?

A bookkeeper can be a great addition to your team and really help you to be able to grow your business.

1. Ensuring the accounts are done correctly.
   
   A qualified bookkeeper can help you to ensure that the information in your accounts is accurate and up to date.  They will know how to correctly categorise the money coming into, and going out of, the business, ensure that you have all the paperwork to support each transaction and that all bank accounts are fully reconciled.  By having an accurate and complete set of accounts, you will have a better understanding of the financial picture of your business, but it also means that if HMRC ever investigates your accounts, they are less likely to find any mistakes and fine you.
   
   
2. Provide you with a better understanding of the financial picture of your business.
   
   With the bookkeeper ensuring your accounts are kept up to date on a regular basis, you will have a more accurate picture of the financial situation of the business.  This means you will be able to make important business decisions such as whether you need to register for VAT, whether you can afford to hire new staff, or did that marketing campaign work.
   
   
3. Help improve your cash flow.
   
   Having a set of accounts that are up to date means that you will have a better understanding of who owes you money, and who you owe money to.  This can help you to have a much better handle on your cash flow and ensure that you are being paid by your customers on time, but that you are also paying your suppliers on time.
   
   With having the accounts kept up to date on a regular basis, the bookkeeper can help you to have a better idea of the amount of tax you might owe throughout the year – allowing you to plan ahead.
   
   
4. Make sure you are meeting your legal obligations.
   
   With a bookkeeper on hand ensuring that your accounts are kept up to date on a regular basis, you will also be able to ensure that you are meeting your legal obligations such as filing VAT returns on time – which will help you to avoid any fines or penalties for late filing. 
   
   At the end of the tax year, the bookkeeper will help to ensure that all the year-end financials are completed and ready to pass over to the accountant who can then prepare any adjusting entries and file your end-of-year tax returns.  The accountant should then in return provide these adjusting entries to the bookkeeper so that they can ensure the accounts software reflects what has been submitted to HMRC and/or Companies House.  Some bookkeepers will be able to file the end-of-year tax returns for you, so it is important to find out whether your bookkeeper is able to do this or not.
   
   
5. Free up your time!
   
   Probably one of the biggest advantages of having a bookkeeper is that it will free up your time so that you can focus on the things that you do best – which is providing your products or services to your customers.  There are so many different things that a business owner has to do, and if those tasks are not something the business owner is skilled at, it can mean that more time is having to be given to those tasks which then takes away from the time the business owner has to focus on their business, their family and themselves.  Having a bookkeeper to help with the accounts will free up that portion of your time.  You will of course still need to provide the information to the bookkeeper, and there will be questions that you will need to answer, but you won’t need to worry about getting all the financial information entered into the accounts or having to take time to research how to enter something into a set of accounts.  You will be able to use your time in a more valuable way.

Work with your bookkeeper, and accountant if you have one, as a team, collaborate so that you can grow your business and achieve your goals.

If you would like further information about what a bookkeeper does or how I can help you with your business, please feel free to e-mail me.

During this month’s Facebook Live, I talked about what happens to your tax code if you are employed and decide to set up a small business of your own and become self-employed.

A lot of people have self-employed businesses but are also employed, and they worry about what that means for their tax code.  They also wonder whether they need to let their employer know that they have a small business of their own.

Let’s look at the tax code side of things first.

The good news is that being employed and having a self-employed business will not affect your tax code that your employer uses for paying you.  They will continue to pay tax on your behalf to HMRC based on the tax code HMRC provide to them as an employee. 

However, at the end of the tax year when you file your tax return, the money you have made from your employment, plus the money you have made from your self-employed business, will be added together to see if you have gone over the personal tax threshold.  Currently, this is £12,570 and it will stay that way until 2028.  HMRC will also add in any additional income you may have – rental income, income from shares, pension income/contributions, interest received on savings etc.

If you have gone over the threshold, HMRC will take into consideration the amount of tax you have already paid through your employment, and you will then have to pay any remaining amount to them.  The information from your employment should already be entered into the tax return with HMRC, but you will be able to check this against your P60 that your employer provides to you.

The tax rates for the 2022/2023 tax year are as follows:

• Basic Rate which is 20% and charged on income between £12,571 and £37.700 for England, Northern Ireland, and Wales
• Higher Rate which is 40% and charged on income between £37,701 and £150,000 for England, Northern Ireland, and Wales
• Additional Rate which is 45% on all income over £150,000 for England, Northern Ireland, and Wales

The rates for Scotland are different due to the different tax they pay, and you can find the information about these rates by going to the income tax rates and allowances page on the HMRC website.

The tax rates for the 2023/2024 tax year are changing slightly and from April 2023, the rates for England, Northern Ireland and Wales will be:

• Basic Rate 20% on income between £12,571 to £50,270
• Higher Rate 40% on income between £50,271 and £125,140
• Additional Rate 45% on income over £125,140

This means that more people will start to pay tax the highest tax rate sooner.

While you pay toward employee National Insurance contributions through your employment, through the self-employed business you will be liable to pay Class 2 National Insurance which is £3.15 per week for the 2022/2023 tax year and is paid on profits of more than £11,908/year, as well as Class 4 National Insurance if your profits are more than £11,909 per year.  The Class 4 National Insurance rates are 9.73% on profits between £11,909 and £50,270, and 2.73% on profits over £50,270.  These will be calculated for you once you complete your tax return and HMRC will let you know what you need to pay to them.  You can read more about the National Insurance a self-employed business has to pay by going to the page on the HMRC website.

What about whether you need to tell your employer that you have a small business of your own?

There is no law that states you must tell your employer if you set up a self-employed business on your own.

However, it is advisable that you read through your employment contract to make sure that you are not in any way in breach of that contract.  Your employer may have certain restrictions on things that you can do outside of work, and you want to ensure that you are not breaking your contract.

You will also want to consider whether your self-employed business will cause any issues with you working for your employer – will it mean you can’t work the hours you are contracted for; will it make it difficult for you to get the work done for your employer?

If you would like further information about being employed and having a self-employed business, please feel free to e-mail me.

On December 19th, 2022, the government announced that Making Tax Digital for Income Tax and Self Assessment (MTD ITSA), is being delayed until April 2026. They have also changed the requirements for those who will be required to file accounts quarterly through MTD ITSA.

Previously, all self-employed businesses and landlords who had an income of more than £10,000 would be required to submit their accounts information to HMRC on a quarterly basis from April 2024.

Now, self-employed businesses and landlords who have an income of more than £50,000 will be required to submit their account information on a quarterly basis to HMRC from April 2026. Any businesses that have an income from £30,000 to £50,000, will not be required to submit their information until April 2027.

You can read the announcement by HMRC here.

Even though MTD ITSA has been delayed, it is still extremely important that businesses maintain their accounts on a regular basis instead of waiting until after the end of the financial year. So that a business can grow and business owners can make informed decisions about the business, they need to have an understanding of the financial position of the business. If the accounts are not completed until after the end of the tax year, the business won’t be in a position to save money through the year in order to pay the tax they might owe. There is also the important part of keeping an eye on your VATable income so that you know when you must register for VAT. If you discover after the end of the tax year, that you should have registered for VAT 7 months beforehand, that could cause a lot of issues for you.

It is also a good idea for those businesses who do not currently keep their records digitally, that they start to do this so that by the time MTD ITSA is in place, they are already in the habit of ensuring they have copies of all receipts digitally and don’t need to worry about if they have lost something.

When you keep your accounts on a regular basis, you are also less likely to forget what transactions are for.

There are many benefits of keeping your accounts up to date on a regular basis, and business owners shouldn’t just wait for them to be mandated to submit their information to HMRC quarterly before they start to get into those good habits.

If you would like further information about how to start keeping your accounts on a regular basis, please feel free to e-mail me.

During this month’s Facebook Live, I talked about whether your bookkeeper should be local to you or not.

The world is changing, and everything is going digital.  You can now use a bookkeeper from anywhere meaning you can pick the right one for your business.

Traditionally, if a business required a bookkeeper, they would hire someone who lived locally to the business.  If they were big enough to warrant it, they would hire someone as an employee to provide the services in-house.  Keeping a set of accounts was all done using paper ledgers, so having someone who was local made it a lot easier to provide them with the information they required.

Over time, desktop accounts software started to be used to keep the accounts, but people still relied on a local, or in-house, bookkeeper, as most of the information needed to keep accounts was still required to be in paper format.

With technology advancing over the years, the various pieces of information that help to create your accounts can now be retrieved digitally.  It is even easier to get the information to your bookkeeper by using e-mail and the cloud.  You are no longer relying on a courier or postman to deliver the paperwork to the bookkeeper, or to even have someone in-house.

The introduction of accounts software like QuickBooks Online and Xero has made it even easier to have access to your accounts from anywhere as you are no longer restricted to using desktop software.  HMRC are also now accepting most records in a digital format.  All these advancements mean that you no longer have to have a bookkeeper who is local to you.  You can now look further afield for the right bookkeeper for your business.

There are several benefits to being able to use a remote bookkeeper from elsewhere.

• You do not need to provide any office space or equipment for the bookkeeper
• Saves you money in terms of business overheads
• You don’t have to worry about your paperwork getting lost in the post as you can share the information digitally

The biggest benefit of using a remote bookkeeper is that you can find the right person to help you with your business.  By being able to access a wider pool of bookkeepers, you can take the time to find someone who is the right fit.  This might be someone who only works with your industry or the software you use.  It could be as simple as the person’s personality sits better with you, and you feel more confident working with them.

When looking for a bookkeeper, whether they are local or not, you need to ensure the following:

• They work with the accounts software you want to use
• They understand the legal requirements you need to follow for your business (this is important if hiring someone from outside of your country)
• They understand the various accounting and tax laws for where you reside (this is important if hiring someone from outside of your country).
• They have Professional Indemnity Insurance
• Whether they are registered with a supervisory body or not and if so, which body and what are they allowed to do based on their body’s regulations
• They are covered by Anti-Money Laundering Supervision and with who (this is a legal requirement of all bookkeepers)

There are many more questions you will want to ask a potential bookkeeper, but these questions will be more specific to your business and what you are looking for.

If you would like further information about hiring a bookkeeper who is not local to you, please feel free to e-mail me.

On Thursday, November 17th, 2022, the Chancellor, Jeremy Hunt, made several announcements during the autumn statement that will impact businesses and individuals. I have explained some of the items that will impact businesses below.

1. All personal income tax allowances and national insurance thresholds have been frozen until 2028. This means that the personal allowance will remain at £12,750 before someone has to pay tax until April 2028. What this does mean though, is that as a person’s salary rises above the personal allowance or the relevant tax threshold, they will start to pay tax, whereas, in previous years, the personal tax allowance has usually increased each year, which would reduce the chances of this happening.
   
2. The threshold for the highest tax bracket (45%) will be reduced from £150,000/year to £125,140/year from April 2023. This will mean people who earn over £125,140 will no longer pay 40% tax on their income, but 45%.
   
3. The current National Insurance Employment Allowance of £5,000 will continue to be available which will help businesses reduce what they need to pay for National Insurance.
   
4. The tax relief on Research and Development is being lowered to 10% from April 2023 which may discourage businesses from investing in this area.
   
5. Businesses, and individuals, that invested in electronic vehicles will have to start paying Road Tax from April 2025.
   
6. The National Living Wage for those over 23 years old will rise from £9.50/hour to £10.42/hour from April 2023. This will affect many businesses as there will be a significant increase in their wage expenses – especially in sectors where the hourly rate is usually low.
   
7. The dividend allowance will be lowered to £1,000 in April 2023 and then to £500 from April 2024. This will mean that those shareholders and directors who take dividends will have to start paying tax on them at a much lower amount than before.
   
8. The VAT threshold of £85,000 will remain until March 31st, 2026.
   
9. The Corporation Tax increase to 25% from April 2023 has been put back into action. This affects businesses with profits over £250,000. Businesses with profits of up to £50,000 will be able to use the “small profit rate” of 19%.
   
10. The annual Capital Gains Tax exemption amount will be lowered to £6,000 from April 2023 and then to £3,000 from April 2024.
    
11. Business Rates:
    – business rates across England will be updated to reflect changes in property values
    – business rates multipliers will be frozen in 2023/2024
    – bill increases for ratepayers will be capping any increases caused by changes in rateable values at the 2023 revaluation
    – support for any eligible businesses in retail, hospitality and leisure is being extended and increased to 75% business rates relief (capped at £110,000 per business) from April 2023
    – any business that has lost eligibility or seen reductions in the Small Business Rate Relief or Rural Rate Relief will be capped at £600/year
    – if a ratepayer makes qualifying improvements to a property they occupy, they will not see an increase in their rates for 12 months from April 2024 to 2028

There is a lot more to the Autumn Statement, but I have covered the main points that will affect businesses of all sizes.

You can read more about the Autumn Statement here: https://www.gov.uk/government/publications/autumn-statement-2022-documents/autumn-statement-2022-html

During this month’s Facebook Live, I talked about how often a business should do their bookkeeping.

There is no hard and fast rule about how often a business needs to do its bookkeeping.  However, there are legal deadlines every business will need to meet, and these deadlines dictate how often you should do your bookkeeping.  There are also many other reasons to do your bookkeeping on a regular basis.

I am going to cover the legal obligations first.

VAT Registered Businesses

If your business is VAT registered, you will be legally required to file VAT returns with HMRC on a regular basis.  The frequency you will need to do this will depend on what HMRC have instructed you to do, but for most businesses, this will be on a quarterly basis.

There are some businesses, especially those within agriculture, that will be required to file monthly returns.

To file your returns, you will need to collate all your financial information for the business.  In this instance, especially if your business has a lot of transactions, getting your accounts up to date monthly, would be a very good idea.  It will help you to ensure you are able to file your returns on time and ensure they are accurate.  It will also help to give you an idea of how much money you owe to HMRC ahead of time so that you can plan for those payments.

CIS Contractors

If you are in the construction industry and must file CIS returns, you will need to do these monthly.  Therefore, it is a very good idea to work on your accounts either on a weekly basis or a monthly basis, so that you can get your CIS return filed on time with HMRC.

Sole Traders

If you are a simple sole trader who is not VAT registered, up to April 2024, you only have a legal obligation to submit your accounts to HMRC at the end of the tax year.  Even though you do not need to submit your accounts until after the end of the tax year, it is not advisable to only do them once a year.  I will cover the reasons why in just a little bit.

From April 2024, the legal requirements will be changing due to MTD ITSA (Making Tax Digital for Income Tax and Self-Assessment).  All sole traders, and those with rental income, who have a gross income of over £10,000, will have to file their accounts with HMRC on a quarterly basis. At this point, it would be a very good idea to ensure you are keeping your accounts up to date monthly.

Partnerships

Currently, partnerships that are not VAT registered, only have to file their tax returns after the end of the financial year.  The partnership return needs to be filed before the partners can file their self-assessments.  Like sole traders, it isn’t advisable to only complete your accounts when the return is due.  It is best practice to complete your accounts monthly.

From April 2025, general partnerships will be legally required to file their accounts through MTD ITSA on a quarterly basis.  Any partnerships that have corporate partners or are a Limited Liability partnership will not be required to file through MTD ITSA at this point in time.  Once this legal requirement comes into place, it makes it more beneficial to complete your accounts monthly.

Limited Companies

All limited companies are legally required to file a corporation tax return after the end of the tax year, and their accounts to Companies House 9 months after the end of the tax year.  It is not advisable to only prepare your accounts once a year but to complete them monthly.

There currently isn’t a set date for limited companies to file through MTD, but HMRC has said it will not come into force until at least 2026.  Once further information is released, I will share it across my social media platforms.

Best Practice

Now that I have covered the legal requirements for submitting accounts, I am going to go through reasons why getting your accounts up to date on a monthly, and sometimes a weekly, basis is so important.

Completing your accounts on a regular monthly basis will be beneficial to your business for a number of reasons:

• You have a better idea of the financial position of your business
• You can make more informed business decisions about the business such as can I afford to hire new staff or did that marketing campaign work
• You will have a better idea of how much tax you owe
• You will reduce your stress as you won’t be scrambling to get everything together all at once at the end of the year
• You have a better chance of knowing what a transaction was for
• You will be less likely to lose any small receipts
• You will be able to spot fraudulent transactions sooner
• It helps with your cash flow as you will know who owes you money and who you owe money too
• It makes it easier to spot any mistakes
• If you need to provide financial reports to a bank or other finance companies to raise funding for the business, you will be able to prepare the reports faster
• You can measure the performance of the business more accurately

Some businesses, especially if they have a high volume of transactions, would benefit by doing their accounts on a weekly basis.

If you would like further information about keeping your accounts up to date monthly, feel free to e-mail me.