Your Accounting Matters Sorted

How to Pay Yourself Tax Efficiently in 2026 as a UK Business Owner

Sun, 01 Feb 2026 09:33:05 GMT

How to Pay Yourself Tax Efficiently in 2026 as a UK Business Owner

If you run a UK limited company, paying yourself isn’t just “take some money out when you need it”. The way you draw income can make a real difference to your take-home pay, and it can also save you a lot of stress when Self Assessment season rolls around.

Most directors end up using a mix of salary and dividends, and that’s still the usual starting point in 2026. The reason it’s worth revisiting this year is simple: dividends are being taxed more heavily from 6 April 2026, and employer National Insurance costs are a bigger factor than many business owners expect. So if you’ve been running the same setup for a while, this is the year to double-check it still makes sense.

This guide explains how to think about a tax efficient salary and dividends 2026 UK plan in plain English, without the fluff.

Salary and dividends: what you’re actually choosing

Let’s keep it straightforward.

A salary is paid through payroll. Your company runs PAYE, reports it to HMRC, and it’s treated like normal employment income. A big plus is that salary is a company expense, so it reduces your taxable profit, which can reduce corporation tax.

Dividends are paid out of profits after corporation tax. They’re not a company expense. They’re basically the company sharing profits with you as a shareholder. You then pay dividend tax personally on dividends above the dividend allowance, depending on your tax band.

This is why directors usually take both. Salary gives structure and a steady baseline. Dividends give flexibility and can be more tax-efficient than taking everything through payroll.

What changes in 2026: dividend tax is higher from 6 April 2026

This is the big one for 2026 planning.

From 6 April 2026 (the start of the 2026/27 tax year), dividend tax rates increase by 2 percentage points for the ordinary and upper dividend rates.

So, in simple terms:

Ordinary dividend rate goes from 8.75% to 10.75%

Upper dividend rate goes from 33.75% to 35.75%

Additional dividend rate stays at 39.35%

Dividends can still be a smart part of the plan. They’re just not as “cheap” as they were, especially if you’re in the basic or higher-rate band.

Step 1: decide your director salary properly

When people talk about optimal director salary 2026, what they usually mean is, “How do I take a salary that makes sense without paying loads of unnecessary National Insurance?”

A salary can be useful for a few reasons:

You get a reliable monthly income

It can help with mortgage applications

It keeps payroll neat and compliant

It can support a qualifying year for certain state benefits (depending on your situation)

But salary can also trigger National Insurance costs for you and for the company.

For 2025/26, the standard Personal Allowance is £12,570 for most people. Employer National Insurance is charged at 15% above the employer threshold, and that employer threshold is £5,000 per year.

That’s why many directors don’t automatically set salary at £12,570. In some setups, pushing salary higher creates an employer National Insurance bill that outweighs the benefit.

The “right” salary depends on your situation: whether you have employees, whether you can use Employment Allowance, and what your overall income looks like. The key is not the exact figure. It’s making the decision on purpose, rather than guessing.

Step 2: take dividends with a plan, not on a whim

Dividends often feel easier because you can take them whenever the company has cash. But tax doesn’t care when you feel like taking money out. Tax cares where your income lands across the tax bands.

Here’s the important bit: dividends sit on top of your other income. So your salary and any other income use up the lower tax bands first, and then your dividends are taxed based on whatever band they fall into.

The dividend allowance gives you a small slice taxed at 0%, but it doesn’t make dividends “tax-free”, and it doesn’t expand your bands. The real value of dividends is how they’re taxed compared to salary and National Insurance.

This is where limited company director pay UK planning becomes less about “dividends are better” and more about “how much dividend can I take before I drift into a higher band?”

Step 3: watch the £100,000 to £125,140 trap

This catches a lot of directors, especially in good years.

Once your adjusted net income goes above £100,000, you start losing your Personal Allowance. You lose £1 of allowance for every £2 above £100,000, and it disappears completely at £125,140.

So if you’re taking extra dividends and you push yourself into that range, your tax bill can jump more than you expect.

That’s why the personal allowance taper £100,000 needs to be on your radar. It’s not about being scared of success. It’s about not sleepwalking into a painful tax band because you took dividends without checking where your total income was heading.

If you’re close to that level, planning options exist, but you want them done properly and in line with your wider goals.

Step 4: Make sure dividends are backed by profits

This sounds obvious, but it’s one of the most common issues we see.

Dividends must be paid out of distributable profits. Cash in the bank is not the same thing as profit. If dividends are taken without profits, it can create problems with your accounts and lead to messy fixes later.

A simple way to stay on top of it is to review your numbers quarterly. It keeps you confident that what you’re taking out is supported by the accounts, and it reduces the chance of nasty surprises.

Step 5: Don’t ignore corporation tax in the full picture

It’s easy to focus only on your personal tax, but remember: dividends come out after corporation tax.

Corporation tax is still tiered:

19% on profits up to £50,000

25% on profits over £250,000

Marginal relief between £50,000 and £250,000

So the “true cost” of a dividend includes corporation tax first, then dividend tax. Salary reduces corporation tax but may increase National Insurance. This is exactly why a blended approach is often best.

A practical structure that feels sensible in 2026

Rather than hunting for one “perfect” number, think in layers.

First, choose a sensible salary that fits your life and keeps payroll tidy. Don’t set it too high just to use the Personal Allowance if it triggers employer National Insurance costs you could avoid.

Second, use dividends to top up your income to your target level, but keep a close eye on what band you’re moving into, especially with the higher dividend tax rates from 6 April 2026.

Third, if your profits are strong, remember you don’t have to extract everything immediately. Sometimes leaving money in the company for working capital, growth, or better timing later is the most tax-efficient move of all.

Timing matters around April 2026

Dividends are taxed in the tax year they’re paid.

So a dividend paid before 6 April 2026 is taxed under 2025/26 rates. A dividend paid on or after 6 April 2026 is taxed under the higher 2026/27 dividend rates for ordinary and upper-rate dividends.

That doesn’t mean you should rush and take money out without thinking. It simply means timing is one of the levers you can consider as part of an overall plan.

Common mistakes to avoid

Taking dividends without checking distributable profits

Setting salary too high without factoring employer National Insurance

Letting dividends push you into higher-rate tax without noticing

Accidentally entering the £100k taper band

Treating pay planning as something you only think about once a year

F AQs

What’s the most tax-efficient way to pay myself as a UK director in 2026?

For many directors, a mix of salary and dividends still works well. Salary gives structure and can reduce corporation tax, while dividends can reduce National Insurance exposure. The best balance depends on profits, other income, and whether higher salary creates avoidable employer National Insurance costs.

Are dividends still worth taking after 6 April 2026?

Often yes, but they’re slightly less efficient than before because ordinary and upper dividend rates increase by 2 percentage points from 6 April 2026. If you take meaningful dividends each year, it’s worth reviewing your approach rather than relying on old assumptions.

Should I just take salary up to the Personal Allowance?

Not always. A higher salary can reduce corporation tax, but it can also trigger employer National Insurance costs. The most sensible salary point depends on your company setup, whether you have employees, and whether allowances apply.

What is the dividend allowance and does it mean dividends are tax-free?

The dividend allowance taxes the first slice of dividends at 0%, but dividends above that are still taxed based on your tax band. It helps a bit, but dividends are mainly attractive because of how they’re taxed compared with salary plus National Insurance.

Why is the £100,000 income level a big deal?

Because once adjusted net income goes above £100,000, your Personal Allowance starts to reduce, and it can create a surprisingly high effective tax rate. If your salary and dividends push you into that zone, proper planning can prevent an unnecessary jump in tax.

Can I take dividends whenever the company has cash?

Only if the company has enough distributable profits and the dividend is properly declared. Cash in the bank doesn’t automatically mean you can take a dividend.

Final thought

A tax-efficient pay strategy in 2026 isn’t about copying what someone else does. It’s about setting a sensible salary, using dividends deliberately, and keeping an eye on the tax bands that create expensive surprises.

5 Numbers Every Creative Should Know (That Have Nothing to Do With Spreadsheets)

Thu, 07 Aug 2025 21:05:23 GMT

5 Numbers Every Creative Should Know (That Have Nothing to Do With Spreadsheets)

Let’s face it; most creatives did not start their business to build spreadsheets.

You started it to design, to express, to build something beautiful.

But as your business grows, a few key numbers (that are not even in your spreadsheet) start to define your profit, peace of mind, and long-term success.

Here are 5 numbers every creative founder should know; no accounting jargon, no spreadsheets required.

1. Your Minimum Monthly Amount to Breathe

Not to break even. Not to “survive.”

But to breathe; comfortably.

This is the real number that covers:

Your personal bills

Your must-have business costs

The cushion you need to sleep at night

Why it matters:

This becomes your pricing floor.

If your business is not meeting this, you are undercharging or overstretched.

2. Your Time Cost per Project

Ever thought, “That project took way longer than I planned”?

You are not alone.

Even without spreadsheets, just estimating how long you spend on:

Discovery

Design/revisions

Client hand-holding

Admin

...will show you if you’re making £15/hour or £150/hour.

Why it matters:

It is the first step to pricing profitably and planning sustainably.

3. Your “No” Number

What is the income level where you can start saying “no” to bad-fit clients?

Every creative business needs a “no” number.

It is the point where you no longer need to say yes to:

Undervaluing work

Scope creep

Clients who drain your energy

Why it matters:

Clarity here builds confidence. Confidence builds boundaries. Boundaries build profit.

4. Your Dream Project Number

What does your dream client/project/retainer need to pay you to be worth it?

Get specific:

How many hours would it take?

What would you need to hire or outsource?

What price would make you feel proud?

Why it matters:

This becomes your north star when pitching, positioning, or saying yes.

5. Your WTF Number

The number in your bank account where you start panicking.

We all have one; let’s stop pretending we don’t.

Knowing your personal “uh-oh” number allows you to:

Plan in advance

Create a cash buffer

Avoid making panic-based decisions

Why it matters:

You cannot be creative when you are constantly in survival mode.

�� Final Thoughts

None of these numbers live in Xero or QuickBooks.

They live in your head, your gut, your bank account, your boundaries.

But when you start tracking them; even roughly, you build a business that feels clearer, calmer, and more in your control.

Need help figuring them out?

This is exactly what I help creatives and agencies do; without jargon or overwhelm.

Get in touch here and let’s make your numbers make sense.

What I’d Tell Every Creative Agency About Pricing If I Had 10 Minutes With Them

Wed, 16 Jul 2025 01:02:30 GMT

What I’d Tell Every Creative Agency About Pricing If I Had 10 Minutes With Them

Let’s be honest most creatives don’t start their business thinking,

“Can’t wait to build out a financial pricing model!”

You start with ideas. Vision. Passion.

And then somewhere along the way, pricing becomes this weird mix of guessing, copying competitors, and hoping for the best.

But pricing is everything.

It’s the difference between surviving and scaling.

It’s the line between burnout and building something sustainable.

If I had just 10 minutes with every creative founder, here’s what I’d say.

1. Pricing Isn’t Just About Covering Your Costs; It’s About Funding Your Life

You didn’t go self-employed to work 70 hours a week and still feel broke.

So before anything else, get clear on this:

�� What do you want to take home?

�� What kind of lifestyle do you want to live?

Then build your pricing backwards from that.

Not from what others charge. Not from what you think a client “will pay.”

From what you need to run a life-giving, profitable business.

2. Your Prices Should Say “I’m the Expert” Not “I’m Desperate”

Undercharging does more than hurt your bank balance it damages your positioning.

If your quote is too low, it raises red flags:

“Why is this so cheap? Are they experienced? Will this be a headache?”

Pricing with confidence signals credibility. It attracts better clients the ones who respect your process, pay on time, and don’t haggle over every line item.

3. Day Rates Are Fine Until They Cap Your Growth

I get it. Day rates feel safe.

But if your pricing is time-based, you’ll always hit a ceiling.

You only have so many hours.

Start shifting your mindset from hours to value.

You’re not just designing a website you’re helping someone look credible, attract clients, and grow their brand. That’s worth more than a “day.”

4. If You’re Not Building Profit Into Every Project; You’re Just Buying Yourself a Job

So many creatives charge just enough to cover delivery.

But where’s the margin for:

Admin time

Proposal writing

Revisions

Quiet seasons

Investing in yourself or your team?

Every project should contribute to your profit pot. Otherwise, you’re just creating busywork that doesn’t move you forward.

5. You Don’t Need to Be a Finance Expert; You Just Need the Right Support

You weren’t meant to do all of this alone.

If you’re not sure what to charge, if your margins feel razor-thin, if you’re nervous every time a big invoice goes unpaid that’s not a personal failure. That’s a systems problem.

The good news? It’s fixable.

With the right financial partner, you can:

✅ Price for profit

✅ Plan for growth

✅ Stop the feast-and-famine cycle

✅ Actually enjoy your business again

Let's Fix Your Pricing, Together.

I specialise in helping creative agency founders turn financial chaos into calm through strategic pricing, clean reporting, and honest conversations.

If you’re ready to charge what you’re worth and build a business that pays you properly, let’s talk.

Book your 1-1 Finance session at the link below

�� [https://cal.com/anum1]

You’re Not Bad with Money, You’re Just Not a Finance Bro

183:797318193 (Anum Hassan) — Mon, 07 Jul 2025 19:00:36 GMT

If you're a creative founder who feels lost with finances, you're not alone. Here's why it's not your fault and how a different kind of financial support can change everything.

Let’s get one thing clear:

If you’re a creative founder, a designer, a brand strategist, a digital storyteller; you are not bad with money.

You’ve built something out of nothing. You’ve turned talent into a business. You’ve handled clients, deadlines, content, ideas, staff, suppliers and somehow kept it all afloat.

That’s not “bad with money.” That’s resourceful. That’s resilient. That’s brilliant.

But the truth is the financial world wasn’t built for people like you.

The Finance World Talks in Spreadsheets.

You Think in Stories, Colours and Strategy.

Most accountants you meet will talk at you in jargon. They’ll send you tax returns and PDFs and expect you to just “get it.” But they don’t sit down and show you how to build a business that pays you properly. They don’t ask how much you want to earn. They don’t check how your cash flow feels when a client pays 30 days late.

They assume you’re like every other business.

But you’re not.

You’re a creative. That changes everything.

You Don’t Need a Lecture.

You Need Someone Who Gets It.

The feast-and-famine cycle is real. Some months you’re up, some months you’re coasting on fumes. You’re spinning so many plates; client work, social content, emails, proposals and when it comes to finances, you think:

“I’ll look at that tomorrow.”

But then tomorrow becomes next month.

And suddenly it feels too messy.

So you avoid it. And feel guilty. And assume it’s just you.

But it’s not just you.

This is happening to so many creatives.

And I want you to know there’s nothing wrong with that.

The Missing Piece? Financial Clarity That Feels Like It’s Made for You.

Imagine if your accountant didn’t just talk tax.

Imagine if they helped you:

✅ Understand where your money’s actually going

✅ Plan for quieter seasons

✅ Set prices that feel fair and profitable

✅ Build a cash flow you can actually breathe in

✅ And feel in control not confused, overwhelmed, or behind

This isn’t about turning you into a finance expert.

It’s about giving you the tools to run your business with clarity and calm so you can do more of what you love, without burning out.

You’re the Creative Genius.

Let Me Handle the Numbers.

I work with creative founders, boutique agency owners and digital service businesses not just as an accountant, but as a partner in your business journey.

I’ll explain the numbers in plain English, help you make strategic decisions, and be the quiet financial brain in the background so you can stay in your zone of genius.

Ready to finally feel good about your finances?

Let’s have a friendly, no-pressure chat just click below to book a free 20-minute intro call.

�� https://calendly.com/accountingassist/multi

�� Or connect with me on LinkedIn where I share financial insights for creative founders regularly

2020 Deferred Tax - Payment Extended

183:797318193 (Anum Hassan) — Thu, 18 Feb 2021 19:54:02 GMT

Businesses that deferred VAT due from 20 March to 30 June 2020 and still have payments to make now have option to opt into the VAT deferral new payment scheme to pay their deferred VAT in 11 interest free monthly installments.

The businesses can either

Pay the deferred VAT in full, on or before 31 March 2021 or
Join the VAT deferral new payment scheme – the online service is open between 23 February and 21 June 2021
Contact HMRC on Telephone: 0800 024 1222 by 30 June if they need extra help to pay

Failure to do one of above will result in interest or penalty.

The businesses on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme,will

be invited to join the new payment scheme later in March 2021.

The new scheme lets you:

Pay your deferred VAT in equal instalments, interest free
Choose the number of instalments, from 2 to 11 (depending on when you join)

To use the online service, you must:

Join the scheme yourself, your agent cannot do this for you
Still have deferred VAT to pay
Be up to date with your VAT returns
Join by 21 June 2021
Pay the first instalment when you join
Pay your instalments by Direct Debit (if want to use the scheme but cannot pay by Direct Debit, there’s an alternative entry route for you)
If you join the scheme, you can still have a Time to Pay arrangement for other HMRC debts and outstanding tax

The month you decide to join the scheme will determine the maximum number of instalments that are available to you. If you join the scheme in March, you’ll be able to pay your deferred VAT in 11 instalments or fewer.

The table below sets out the monthly joining deadlines (to allow for Direct Debit processing) and the corresponding number of maximum instalments (including the first payment):

Join by Number of instalments available

19 March 2021 11

21 April 2021 10

19 May 2021 9

21 June 2021 8

What is Deferred Tax?

Sun, 17 May 2020 13:09:19 GMT

Deferred tax can relate to a positive or negative asset and the entry can be found on a balance sheet. This entry refers to the tax that has been overpaid or is owed due to a few differences. The positive entry is considered asset and negative entry is liability.

Deferred Tax Asset

Over payment or advance payment of tax by a business in a period is marked on the balance sheet as a deferred tax asset. It shows that the company is entitled to a small tax break the next time they file their taxes. Paying in advance, creating tax assets helps a business that is looking to decrease the tax liability in the next period.

Deferred Tax Liability

On the other hand, Deferred tax liability occurs when a company’s estimated tax using income for a specific accounting period’s accounts is different to the taxable amount that is found on their tax return. In this case, a liability is entered on the balance sheet. This is where the amount that has been entered onto the balance sheet has to be paid in the future.

Does it affect Cash flow?

Deferred tax assets and liabilities can have a strong impact on cash flow. An increase in deferred tax liability or decrease in deferred tax assets is a source of cash. Likewise, a decrease in liability or an increase in deferred asset is a use of cash.

Analyzing the change in deferred tax balances is important as it helps to understand which direction are the balances moving towards i.e. will the balances continue to grow in same direction or is there a likelihood of reversal in near future?

Temporary Differences

An important concept to be kept in mind in relation to deferred tax is temporary taxable differences. This occurs when a business has an asset with a liability value that does not match with the current taxable value of the asset. This happens when the accounting approach and tax laws differ in how the depreciation of an asset is handled. These temporary differences can impact on a financial account because they mean that income and expenses appear within one accounting period, but the tax is payable in a different accounting period. A taxable difference can be either taxable or deductible.

Example to understand the deferred corporation tax:

To understand the concept of deferred tax let’s consider an example. Your business generates £10,000 in profit per year. In the first year you purchase a laptop that costs £1,000 and the life of your laptop is 4 years, that is, after 4 years your laptop will be worthless. Hence, the depreciation for laptop would be calculated to be £250 per year. Now, let’s consider your profits to stay at exactly £10,000 for all the following years (5 years).

Now, according to capital allowance rules, you can deduct the full £1,000 from your profit of £10,000 taxable profits in year one and hence will pay tax on a profit of £9,000 (rather being on the accounting treatment in year one to five and paying tax on a profit of £10,000-£250 = £9,750). Overall, the same amount is claimed and across the five years the same tax will be paid.

Insolvency and its effects on Businesses

Sun, 17 May 2020 12:02:10 GMT

Insolvency and its effects on Businesses

Insolvency is the state of being unable to pay the money owed, on time, when a business doesn’t have sufficient funds to meet its financial obligations it can become insolvent. A business having liabilities greater than its assets can be facing risk of insolvency.

The insolvency of a business is a stressful situation for the company’s directors and staff members. There are two types of insolvencies; cash-flow insolvency and balance-sheet insolvency. Cash-flow insolvency is when a company has enough assets to pay the owed money, but it does not have the appropriate form of liquid payment e.g. cash. Balance-sheet insolvency, on the other hand, is when a company does not have enough assets to pay all of its debts.

Consequences of Insolvency

For Limited Companies

For limited companies or limited liability partnerships known as “LLP’s”, the consequences of insolvency will mean that the business will go into liquidation and stop trading or go into administration and be sold.

For Sole Traders

For sole traders or partnerships, the business owners are liable for the debts and their personal assets are at risk of being sold to repay their debts. In some cases, for bankrupted business owners, there is a possibility to face BRO’s which are Bankruptcy Restriction Orders. This happens if the business owners have misbehaved in their business running history and is investigated and taken in action by Insolvency Service.

Steps that can be taken to avoid insolvency

For the business directors it is better to realize and identify the insolvency situation as soon as possible. Soft consequences and hard consequences both are of the same seriousness for both directors and the company’s viability.

Here are some suggestions which, in our opinion, may be helpful for you to avoid this stress.

First of all, you should identify the problem as soon as possible, so that further actions can be taken. This could be made possible only by knowing the symptoms of insolvency and having an eye on such symptoms
Keep an eye on your cash flows , keeping on top of cash flow forecasting and budgeting on regular basis
At the very early stage, arrange a conversation with the relevant creditors, whom you owe debts
Try to get an extension in the debt repayment agreements. You can also alter this agreement after having a conversation with the creditor. These steps may give your business a space to get settled and stable financially
In such a state, do not allow the company to incur further debt and do not continue to trade
You can bounce back your business by seeking immediate help from a licensed insolvency practitioner. This will help you give many solutions and finance options for the recovery of your business which would be appropriate and available according to the situation. This will also give suggestions about how to increase your cash flow which will in return increase your assets and stability of the business

Need help with reviewing your cash flow or budgeting? G et in touch with us for a no obligation assessment call.

Bounce Back Loans

Mon, 04 May 2020 01:31:10 GMT

UK Government Announces an Offer of 100% Guarantees on “Bounce Back Loans”

The Chancellor Rishi Sunak, on Monday 27th April, has announced an offer of 100 per cent guarantees on “bounce back loans” of up to £50,000 for the smallest businesses affected by the coronavirus outbreak.

“This is addition to business grants, tax deferrals, and the job retention scheme, which are already helping to support hundreds of thousands of small businesses.”

This new micro-loan scheme is designed to help small businesses struggling to access credit during the current lockdown. The scheme would be providing a simple, quick and easy solution for those who are in need of smaller loans.

These loans would cover 25% of a business’s turnover up to £50,000
Government is guaranteeing 100% of the loan which will be interest free for first 12 months
The scheme allows businesses to borrow between £2,000 and £50,000
The scheme has been designed to ensure that small firms who need vital cash injections to keep operating can get finance in a matter of days
The loans will be available from 9am 4th May and payments would be made within 24 hours of approval, with “no complex eligibility criteria”
Applicants will not face a viability test but some fraud checks will have to be completed
Small companies will be able to apply through an online

Is cloud-based accounting software right for you?

Sun, 26 Apr 2020 02:19:45 GMT

In this age of advanced technology and in an era of commotion, it’s everyone’s top most priority to use the most developed tools and technological facilities.

It is important for businesses is to keep proper and secure records of all accounting data and information which can be achieved by the help of a software which is reliable, up to date, time saving and can prevent any trouble in the future.

Cloud Accounting Software can solve all of troubles and complications coming in the way of keeping a smooth and easily accessible record of accounting data. This software is hosted on a remote server. This uses internet to access the accounting records and information. Hence in cloud accounting software you don’t need to store your data in your computer i.e. your computer’s hard drive. Also, this is not based on your local server.

The data which is stored in the cloud can be easily accessed as and when required by signing in using your login and password. Your accounting data this way stays safe, secure and private. In simple terms it can be called online accounting.

Key accounting features of cloud accounting software

 Easy management of intercompany transactions

 Easy creation of management reports in Excel

 Smart search, filters and drill-down features to slice and dice data

 Submission of tax returns digitally

 Easy accessibility to Microsoft Outlook

 Manage account records with an audit trail

 Multi-currency accounting and automated rate conversion

 Multi-dimensional ledgers

Cloud accounting software versus traditional accounting software

Here is a comparison between cloud accounting software and traditional software, through this would easily be recognized the benefits and advantages of cloud accounting software

• Whilst using traditional software, you need a proper working place with a complete set up of computer and all the required gadgets. Also, for this purpose you need to stay at your office throughout the working hours. Cloud accounting software, however, doesn’t require this, you can work outside your office or wherever you are sitting as all records can be accessed remotely.

• This is quite an obvious fact that doing any type of work manually requires more time, efforts and energy. In traditional software we have to do most of our work manually which wastes times as well as working potential. Cloud accounting software on the other hand gains information online as in the cloud accounting software you get access to HM revenue and Customs service, internet banking and any other relating area.

• Whenever working through a computer, there is always a possibility of your computer or any other tool you are using, to get damaged, lost or even stole. While using cloud accounting software, you can do your accounting work confidently without having any fear that your device would get damaged or lost. In case, anything like this happens to your computer or device you are using, you don’t need to be stressed because all your accounting data and information is safe and secure in cloud.

• Cloud accounting software doesn’t require purchasing any type of servers, tools or gadgets which may be your need while using traditional software because cloud accounting system use internet for the working. This in return saves money invested on these tools as well.

• While using cloud accounting software many users can enter the system at the same time and work together regardless of their sitting areas. Traditional software, on the other hand, might not provide this type of facility and hence a limited number of people and users can work at a time.

• Transfer of information is also very easy while using cloud accounting software. Traditional software uses hard disc or emails, which sometimes make your work complicated. Using cloud accounting software, you can also get rid of such complications.

If you are looking to be setup on cloud accounting software or need more information why not have a no-obligation chat with us with us, we specialize in cloud accounting software such as QuickBooks, Xero, Sage and Kashflow.

New tax Year Resolutions for Small Businesses

Sun, 05 Apr 2020 02:19:19 GMT

In the same way as new year’s resolutions of healthy eating and starting gym are needed at the start of calendar year, New tax year is the best time to get your business in shape by setting targets and goals for the year ahead.

This tax year commencing on 6th April 2020 is not like any other new tax year with so much going on with the country being on lockdown and the Covid-19 situation but at the same time this is the best time for business owners and executives to think and adapt practices which could improve their business’s financial and operational health during tax year 2020/21

Here are some suggestions which we consider to be helpful for this new tax year,

Claim all your expenses

Having clear understanding of allowable business expenses i.e. expenses you can claim and those you can’t claim will help you lower down your reported profit. This will reduce the amount of tax you pay and will ultimately maintain your cashflows and will keep your business running.

Paying expenses own pocket disrupts your cashflow hence it is important that you keep record and claim all allowable expenses. There is a wide range of expenses you can claim some of which are,

Office equipment
Software
Stationary
Stamps
Computers
Business mileage
Working from home
Work uniform (as long as it carries the company logo, clothing for personal use cannot be claimed, and general business attire cannot be claimed as a uniform expense.)
Protective work clothing (e.g. eye goggles, if it’s a business necessity)
Some forms of travel (e.g. journeys that are made for work purposes outside of your normal commute)

If you are not sure what expenses you are entitled to and what not, you can also consult us for a better assistance and guideline.

Improve your tax efficiency

Being an owner of your small business, you must have to be adaptive to the tax changes as every year new tax policy gets released by the government. This tax year, however, no major changes in tax legislation have been announced for the next 12 months. So, our wise piece of advice for the small business owners, at this stage would be to get accustomed to some of the tax rates so you’re prepared for all eventualities.

To improve your tax proficiency, make sure that you are taking the most tax efficient combination of salary and dividends.

With Covid-19 outbreak and lockdown things are a lot different this year, governments help for businesses in these difficult times can be found here

Get ahead of your tax deadlines

Meeting tax deadlines must be a priority for every business. Our advice, however, is to do your self-assessment tax return early. You shouldn’t wait for the deadline to come and file your tax return then. This will in turn help you lessen your work load.

Here are some of the tax deadlines for the owners of the limited companies as well as Sole Traders, but ideally you shouldn’t wait for these tax deadlines and do your tax returns as early as its possible. Some of the key tax deadline are as follows,

Submit P11D form by 6th July
Pay second self-assessment tax instalment by 31st July
Submit your VAT return one calendar month and seven days after the end of the VAT period
Self Assesment Returns; 31st October for paper returns and 31st January for Online returns
Keep yourself updated and make yourself organized while keeping your records

In order to succeed as a business, it is important to stay up-to-date, organized, keep record of your payments and receipts whilst keeping your books simple and clean. The start of this new tax year is a feasible time for you to reorganize and manage all your company’s records.

Use effective and updated software to keep all your accounting records. In this age, there is a choice of various softwares which can store all your records and business documents without breaking the bank. These softwares can also help you with planning by providing useful financial and operational information whilst saving time and admin expenses.

Consult an Accountancy Professional

Getting an accountant can help ease stress, your accountant will help you in preparing and filing your accounts along with tax returns before the deadlines, keep your books clean, provide assistance on claiming allowable expenses, provide you important strategic and financial information, deal with HMRC on your behalf and will also keep record of your revenues and expenses.

Looking or an accountancy professional you can rely on without breaking your bank? Get in touch with us as we have packages for every budget and would would be pleased to cater your needs.

UK Government’s Covid-19 Self-Employed Income Support Scheme

Sun, 05 Apr 2020 02:05:04 GMT

Initially announced Corona-virus wage subsidies by the government for the employees didn’t cover self-employed and directors which raised a lot of criticism but finally the long-awaited good news for the country’s 5 million self-employed workers has been announced, on Thursday 26th March.

The employees were covered by the Coronavirus Job Retention Scheme (CJRS) and the self-employed now are covered by Coronavirus Self-Employed Income Support Scheme (CSISS).

Key points of the scheme are,

Self-employed who are eligible for the scheme will be paid 80% of their average income per month over the tax years 2016/17, 2017/18 and 2018/19
There is a cap of £2500 per month
The financial support will not be available until mid-June
Those who have setup as self-employed April 2019 shall not be considered under the scheme
The scheme is open to the self-employed who were trading during last financial year, still are trading and also have a plan to continue
The scheme will be open to those with a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19
Self-employed workers on a low income and affected by the economic impacts of COVID-19 can access the full range of the welfare system, including Universal Credit
Minimum Income Floor of Universal tax Credit will not be applied for Self-employed and universal credit should be paid within a few days
Self-assessment payment due on account by 31 July 2020 can be deferred until January 2021

How to claim?

People do not need to apply or contact HMRC
HMRC will itself invite eligible self-employed workers to make applications by using the existing information
The self-employed worker will confirm that they meet the eligibility requirements along with providing their bank details
The grant will be paid straight into the bank account

What about Directors owning Limited Company?

Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will have 80% of their salary covered by the Coronavirus Job Retention Scheme if operating through PAYE.

Coronavirus Business Interruption Loan

Sun, 05 Apr 2020 01:57:54 GMT

Coronavirus Business Interruption Loan

Coronavirus Business Interruption Loan (CBILS) Scheme launched by government and coordinated by the government owned British Business Bank, provides loans of up to £5m to help small and medium sized businesses across UK experiencing cashflow disruptions due to coronavirus.

CBILS supports a wide range of business finance facilities as term loans, asset finance, overdrafts, invoice finance. The scheme is available through the 40 accredited lenders.

List of accredited lenders can be found here,

In order to be eligible for this facility, the loan must be for UK based business with annual turnover of no more than £45m. Businesses who want to use CBILS will need to be viable were it not for the current pandemic.

Key features

• The loan is provided to the maximum value of 5m pounds on repayment terms of up to 6 years

• The government provides a guarantee on 80% of all money lent through the scheme encouraging lenders to accept those loans

• Businesses using CBILS will receive a 12-month interest free holiday with government paying their interest charges and other fees

• Short term finance facilities such as overdrafts and invoice finance facilities will be available for up to 3 years

• Term loans and asset finance facilities will be available for up to 6 years

• No guarantee fee for SMEs to access the scheme

• Loans of up to 250,000 pounds may be unsecured at the discretion of the lender and any borrowing over this will require the lender to evidence no security is available before using CBILS

• The borrowers are always 100% liable for the debt

• Banks, building societies, Insurers and Reinsurers, state funded schools, trade unions and professional or employer based, religious or political organizations are not eligible for the scheme. In addition, Fishery, aquaculture and agricultural businesses may not qualify for full interest free and fee levy in the first 12 months

How to Apply?

Application for CBILS should be made directly with one of the lenders participating in the scheme and not the British Business Bank. The demand for these loans is likely to be high, so the British Business Bank has asked businesses to apply with lender’s online rather than going to a branch or calling.

Covid 19 and UK Government’s Intervention

Tue, 24 Mar 2020 23:49:57 GMT

UK Prime Minister, Boris Johnson announced UK lockdown on Monday 23/03/2020, People may only leave home to exercise once a day, travel to and from work when it is "absolutely necessary", shop for essential items and fulfil any medical or care needs. Shops selling non-essential goods have been told to shut and gatherings in public of more than two people who do not live together are prohibited.

All public premises apart from Banks, Supermarkets food delivery and takeaway services, pharmacies, Petrol stations, garages and car rental businesses, Bicycle shops, Home and hardware shops, Launderettes and dry cleaners, Pet shops, Corner shops, newsagents and post offices have been closed throughout the country and the failure in doing so could result in fines.

The Prime Minister took the drastic decision to prevent the NHS being overwhelmed by patients suffering from coronavirus. Dozens of businesses were already closed before the announcement. All events have been cancelled out. The schools were already closed from Friday for an indefinite time period. These strict measures are only to slow down the unnecessary social contact as the number of deaths due to coronavirus is increasing.

The Prime Minister said “The more effectively we follow the advice we are given, the faster this country will stage both a medical and an economic recovery in full”. He also said that the measures would be enforced strictly.

According to the Chancellor, Rishi Sunak these measures will have a significant economic impact.

But it is not all bad news, government has also taken massive steps to help businesses and employees in an attempt prevent economic destabilization

Help for Employees

Prior week, Chancellor Rishi Sunak made an announcement about how government will step in to help to pay people’s wages. He said that the government will cover 80% of the workers salaries for at least the next three months up to a maximum of £2500 a month per employee.

This measure which government has introduced is Coronavirus Job Retention Scheme (CJRS). Employers will be given a grant to cover+the wages of people who are not working but are furloughed and kept on payroll, rather than losing their jobs. The Chancellor said that the measures would apply to all companies large or small. The extension of this scheme is based upon the circumstances and requirements. This scheme would be backdated to 1st of March.

Help for Businesses

The Chancellor has announced to defer VAT payments for businesses until the end of June.

Business rates suspension for a year for retail businesses and pubs, cafes and restaurants

In addition, £330 billion rescue package of loan guarantees has been announced to help U.K. businesses survive. Corona virus Business interruption loans (CBILS) have been introduced providing up to £5 million for SMEs with no interest due for 12 months, larger firms would be able to access a new lending facility to provide low-cost financing. CBILS is available through the British Business Bank’s 40+ accredited lenders, which are listed on the British Business Bank website

In addition small firms in the retail, hospitality and leisure sectors will also be eligible for cash grants of up to £25,000 via a further funding of £20 billion

Help for Self Employed

He said the universal credit standard allowance for the next 12 months would increase by £1,000 a year, with the working tax credit basic element rising by the same amount as well. Sunak added that Britain would also suspend the minimum income floor for self-employed people affected by the economic impact of coronavirus, meaning that they could access universal credit at a rate equivalent to statutory sick pay for workers

Self-Assessment Payments on Accounts due on 31st July have been deferred until 31st Jan 2021

Deferment of VAT payments for businesses until the end of June

The government has also pledged to postpone its IR35 reforms to April 2021, to help freelancers during the Covid-19 crisis

The government has been massively criticized for not giving sufficient support to the country’s 5 million self-employed freelance workers. An amendment added to the Coronavirus Bill proposes statutory self-employment pay which would cover the lower of £2,917 or 80 per cent of a self-employed person's monthly earnings, averaged over the last three years but this is just a proposal at this stage and has not been approved by the government

Help with Mortgage and Rents

The home owners have been given 3 month’s mortgage holiday and nearly £1 billion of support for renters has also been announced by increasing the generosity of housing benefit and universal credit so that the local housing allowance will cover at least 30% of market rents

If you need advice or assistance with any of above then please feel to Get in touch with us.

Closing of Schools and its impacts on UK's Economy

Sat, 21 Mar 2020 13:03:51 GMT

Why Have the Schools Closed in UK?

As the number of coronavirus patients is increasing day by day and also the number of deaths due to coronavirus is increasing, all the schools in UK are announced to be closed from Friday afternoon until further notice. This is to try to curb the spread of coronavirus. This measure was firstly taken in Wales, afterwards Scotland and then Northern Ireland, and now it’s declared by the Prime Minister that all the schools nationwide including nurseries and private schools will remain closed. The exams schedule has been changed and GCSE and A-level exams will not take place in May and June.

The children of key workers such as emergency workers, NHS staff and delivery workers would be the exception and would still be looked after.

The closure of schools has taken place to put some brakes on the system of transmission of coronavirus as the virus needs hosts for its spread. It is also to ensure thar NHS critical care may not reach critical capacity.

Effects of school closure on small businesses and economy

The closure of school will have far-reaching impacts on the economy. The small business owners will be hardest hit. For many working parents, the closure of schools and nurseries will mean huge issues. Some of them rather many of them will have to take time off work because of child care issues. Their leaves from work due to this reason will definitely affect business operations.

Closure of schools and cancellation of public events would massively hit business world creating a bad story. That bad story translates into less economic activity across the board which will range from hiring to investment to the availability of capital.

Initially lost wages due to being on leave for the parents who are taking care of their kids at home was a massive concern but the chancellor Rishi Sunak’s recent commitment of reimbursing 80% of furloughed workers wage costs up to £2,500 per month resolves this issue but at the same time there is fear of delays in these payments as HMRC systems are designed to take payments not make them. These extreme measures taken by government will ultimately contribute to the national debt.

The businesses owners of private nurseries and day care centers would be affected adversely and in extreme circumstances could result in shut down of businesses until the situation gets favorable.

In addition, businesses driven by students such as stationary items, uniforms, school transportation services and many more will also take a hit. With the closure of schools, the consumer demand for such products will reduce hence causing such businesses to go through contraction process which again in extreme circumstances might lead to shutdown of these businesses.

Closure of the schools would overall be causing damage to the economy. This will reinforce collapse in the expanding state and may result in the recession. Coronavirus has caused much damage to the economy and is continuing to do so with every passing day.

In uncertain times like this we must stand together and help one another hence Accounting Assist as always is here for you, please feel free to get in touch with us if you need financial advice, during this crucial time we are offering small businesses help with cash flow forecasting free of any charge and no current or future obligation so please feel free to get in touch should you need any help or advice.

How to Cope with Corona Virus and its Impacts on Businesses

Tue, 17 Mar 2020 17:25:00 GMT

Effects of coronavirus and how can Businesses Cope

Coronavirus has affected not only China’s economy but its influence on the rest of the world’s economy is also heart-breaking. According to ‘Organisation for Economic Cooperation and Development’ the growth in world’s economy this year could be slowest since 2009 due to coronavirus outbreak. Economists also suggest that if continued this outbreak could halve the growth rate in 2020 as factories suspend their activities and workers stay at home because of the virus.

The new cases in coronavirus are causing travel restrictions and are slowing down business activities in affected areas

Change in demand for the products has lowered down and is expected in the future as well. Apple the giant of technology has said that its sales have suffered due to low demand by customers. Disrupted manufacturing, because of the employees being out of work, has also been observed and hence leading the stores empty and disrupting supply chain.

Coronavirus has also impacted stock markets negatively. Stock markets worldwide seen their worst crash in Feb 2020 since 2008 financial crisis due to Coronavirus pandemic

Here are some preventions that company owners can make to cope with the current situation,

Limit travel for yourself as well as your employees
Provide your staff with best hygiene facilities at work
Establish good communication with employees regarding Coronavirus, its risks and precautionary measures.
Make sure your team knows your plans well so that in urgent situation they know well what to do and how to do the business activities
Prepare your employees for remote work and create policy to work from home during epidemic.
Employees should avoid physical contact with one another for example; handshakes, hugs or sharing of any edible item as it’s a viral disease
Employees should cover their nose and mouths by using a mask. They should use a disposable tissue paper while sneezing or coughing and properly dispose of the used tissues afterwards
Workers should seek proper medical care if they feel unwell
Businesses must closely monitor official Government sources to be updated with government policies regarding businesses in such situation. And they should also provide workers a proper update about all the news and situation
Review and promote your organization’s policies and measures for infection control

Statutory Sick Pay for Covid-19 Suspects & Patients

If an employee contracts coronavirus, it should be treated the same way as any other sickness leave in terms of payment. Legally speaking, you are compliant by paying the affected employees their normal Statutory Sick Pay (SSP)

Government has changed the least time period of 3 days to one day for Covid-19 patients i.e. employees should receive SSP from the first day of their sickness

SSP is normally paid by the employer, the government has announced that it will meet the cost of providing SSP for up to 14 days for workers in companies with up to 250 employees

IR35 Reforms for Corporations & Contractors

Mon, 09 Mar 2020 19:01:35 GMT

If you are a contractor or a company dealing with contractors you might be concerned about government crackdown on IR35. Before we discuss IR35 changes let’s look at its background,

Initial aims of IR35 and its changes

It was initially introduced in 1999 by HMRC. IR35 is a tax legislation which is designed to combat tax avoidance by the workers supplying their services to clients through an intermediary like their own limited company, limited company can simply be defined as a type of business structure which has its own legal identity. These contracted workers are considered disguised employees by HMRC as for all intents and purposes they act as employees but as they are not on a payroll and are registered as limited company which according to in HMRC is a loophole used to pay less tax.

The initial aim, purpose or objective of IR35 was to suppress the individuals practically working in such a way that is similar to an employee but under the semblance of a limited company. In general Freelancers operating through any private company generally pay lower income tax and they don’t have to pay national insurance. Initially when IR35 was introduced, individuals themselves had to decide that whether they fall under IR35 or not but in April 2017, the Government made a change to the legislation. Since April 2017 the Public firms had to decide whether their contractors fall under IR35 or not, hence the responsibility moved from the individuals to the firms in public sector.

Future rules and reforms

Now as we understand background of IR35 let’s see what is this change that everyone is lately talking about; From 6 April 2020 onwards IR35 will also apply to Private Sector in line with the public sector, hence from April onwards even if a contractor works for a private sector but there is a good news, the IR35 reforms don’t impact all private sector corporations but apply to only those fulfilling two of the following conditions,

Businesses having employees more than 50
They have balance sheets assets of more than 51 million pounds
They have a possession or simply a turnover of more than 10.2 million pounds a year

Rest of the businesses avail from ‘Small Business Exemption’ so if you are a small business not fulfilling two of above, you don’t really need to worry about IR35 but if you are a one person business giving your services to only one company under umbrella of a company then your company won’t be of any use to you.

Incorrect determination

If the employer determines a contractor to be off-payroll deciding that they are outside IR35 whilst HMRC disagrees with the determination made then HMRC can investigate and insist on back payment of tax, as well as fines for late payment from the fee-payer.

Tips for contractors to deal with 2020 Private sector IR35 reforms

• To strengthen your IR35 position seek advice through an IR35 specialist

• Have a good communication with your fellow contractors

• Attend the events regarding IR35 changes

Tips for Employers to deal with 2020 private sector IR35 reforms

• Clients be aware when a worker is providing services through an intermediary

• Determining employment status by considering the information from worker and any other relevant party in supply chain

• When the workers fall within the new regime it is significant to negotiate new contractual terms

• Clients need to create a budget statement for all the additional costs otherwise this will give a negative impact on the profit margins

Whether you are an employer who has contractors falling inside IR35 reform and you need help with putting them on payroll or you are a contractor falling outside IR35 who needs help with accounts, if you Get in touch with us we will be able to help you by providing effective yet economical solutions as per your needs.

Tips for Smooth Running of your Business

Sun, 08 Mar 2020 09:29:25 GMT

Growth and scaling of business is top priority of all business owners as it is a necessity for any business’s survival and economic well-being in today’s corporate world but at the same time scaling of business can be hard as it takes considerable efforts, running your regular business operations along with working on its growth means wearing two hats. It means dealing with sales and marketing at the same time along with taxes and corporate compliance.

Two main tips from Accounting Assist on this are,

To ensure that the revenues must exceed the expenses
To Keep all the books clean and pay taxes on regular basis

The issue is that it is simple to recommend the above two but achieving them is a different story, Accounting Assist has compiled some suggestions which have been successfully used by other businesses and will help you achieve your business’s economics goals

Keep business and personal accounts separate

In accounting one of the messiest blunders which business owners make is mixing of their personal and business accounts and funds. It ends up in a disaster most of the times.

Keep different bank accounts for your personal expenses and business expenses even if you are a sole trader
Establish your business as a separate entity
Segregate the receipts record
Use Microsoft Excel, Quick Books, Xero, Sage or any other method to track your finances and use separate tracking systems

Keeping your personal and business finances separate makes the monitoring of your profits and losses over any period quite so easy. It also plays a vital role during tax season as taxation requires a clear and balanced account for an easy and quick tax filing.

Classify workers properly

Two choices exist when it comes to building a business team, you can hire full time employees or contractors. On one hand employees are a behavioral authority whereas on the other hand contractors are people who work for your company on a project basis.

It can be hard for business owners to classify workers properly because the penalties for disqualifying workers are steep. If the classification is not made according to the HMRC policies, the business owner may be fined in case the misclassification is intentional.

To properly classify your workers,

You must consider all aspects of the worker-company relationships
You must have a control over all the financial aspects of the job, including when the worker is paid, whether expenses are reimbursed, what is offered in terms of benefits, and any type of other financial matters
You must provide all the tools and required equipment to the workers

Calculate labor cost before you hire them

The cost of labor is the salaries and wages paid to the employees with the addition of related payroll taxes and benefits over a specific period of time. If you do decide to hire employees, the main task is calculating and ensuring that your revenues are higher than just their wage efficiency. Labor costs include expenses as

Payroll taxes
Bonuses
Insurance
Health benefits

Labor cost includes expenses other than just wages,

It is important to know that how can staff cost be lowered down without sacrificing quality of work. This doesn’t really mean to lower down your wage rate, some ways of doing so are,

Hire labor with good skills and high specialization
Improve your leadership
Conduct regular performance reviews
Have better training arrangements
Promote teamwork
Have good communication with the workers
Supply them with all the relevant and innovative equipment

Create your profit and loss statements on regular basis

Monthly or quarterly Profit and Loss statements or Management accounts are a great way to see whether you are on track to meet your financial goals or not. A profit and loss statement is actually a staple accounting tool that summarizes your company’s income and expenses over a given period of time.

Prepare your business’s revenue statement quarterly
For each of those quarters prepare the statement for your business expenses
Calculate EBIT (earnings before interest and taxes) by subtracting these quarterly business expenses from the revenues
Now account for any interest and taxes and subtract these from your EBIT
Determine whether your company is at profit or loss

Stay on top of your tax deadlines

Filing your tax returns and making your tax payments in time saves you from being fined and also saves you time. Failure to do so can lead your business’s contraction and hence become a hurdle in achieving your business goals hence it might be worth hiring an accountant to handle with this so that you can focus on the core of your business.

Monitor Performance by applying Key Performance Indicators

Along with monitoring financial performance and staff performance discussed above it is also important to monitor performance of different marketing platforms and channels being used by the business and the channels which are using more resources but are not bringing in enough leads should be discontinued to save costs. Some examples of key performance indicators which could be applied are,

Revenue per lead
Expense per lead
Revenue per employee
Expense per employee
Number of New Contracts Signed Per Period
GBP Value for New Contracts Signed Per Period
Hours of Resources Spent on Sales Follow Up
Average Time for Conversion
Net Sales – GBP or Percentage Growth
Growth in Revenue
Net Profit Margin
Gross Profit Margin
Inventory Turnover

Accounting Assist can help you with everything discussed in this article, why not Get in touch with us today to discuss how our services can spare you time to focus on growing your business.

Sole trader or limited company for freelancers? Pros & Cons

Tue, 26 Nov 2019 00:03:16 GMT

Sole trader or limited company for freelancers? Pros & Cons

It can be daunting to decide whether you should operate your business as a sole trader or limited company as both options have their own perks and drawbacks.

No matter how small your business may be, you have to choose appropriate legal structure for tax purposes.

Sole Trader

Operating as sole trader or self-employment is very simple business structure whereby one person is solo owner of a business. The sole trader status can be setup on GOV.UK website. Majority of freelancers work as sole traders due to simplicity as minimal paper work is required with this approach. The sole trader is solo owner of any profits or losses made by the business.

Pros

Less paper work to worry about as no record keeping is required
Less admin work as submission of only one self-Assessment return is required
No requirement of filing Annual accounts
More privacy as there is no requirement to make any information available to public

Cons

Tax savings are less compared to a limited company
Your personal assets are not protected and can be taken away if you don’t pay your creditors
Your personal credit rating can limit your business’s borrowing capacity

Limited Company

A limited company is an individual legal entity separate from its owners, directors or managers. One person can run a limited company by acting as both director and shareholder of the company. If a freelancer sets up his/her own limited company then he/she is usually director of the company and is entitled to salary from the company and can also receive dividends from any profits made by the company. Directors of a limited company are responsible for timely filing of accounts with company’s house and submission of tax returns to HMRC ever year, failure in doing so can result in severe penalties

Pros

You can make more tax savings by paying 19% Corporation Tax on company profits, and using dividends alongside salary as dividends are taxed from 7.5% for basic ratepayers
Business expenses such as travel, mobile subscription and subsistence etc can be claimed and deducted from profits which will also save you further tax
Your personal assets are protected if the business faces any financial difficulties as limited company is a separate legal entity
Business’s credit ratings will be separate to that of the owner
Your business opportunities can increase as some big businesses have procurement policies which allow them to work with just limited companies
It is easier to expand the business by bringing managers or adding associates
Limited companies can claim tax reliefs such e.g. research & development relief
A limited company has its own distinct identity as once a company name is registered with companies house; no other business can use the same name

Cons

Accounting is not straightforward as limited companies are required to file annual accounts and annual tax return
Limited companies need separate bank account
More admin work is required due to increased record keeping

We hope we have helped you by explaining both options, if you need further advice in making the right choice for your business then get in touch with us

How can Small Businesses Manage Cash Better?

Mon, 11 Nov 2019 00:06:48 GMT

Cash Management for Small Businesses

In a small business; cash is king, as availability of sufficient cash determines if a business is running efficiently or not and it plays critical role in maintaining a company’s competitiveness and in fueling its growth.

Running out of cash can cause a company significant distress and even bankruptcy at the worst but on the other hand leaving too much cash on the table and not investing or utilising it towards business’s growth is loss of opportunity. Hence, it is important for a business to have appropriate managerial accounting strategy to ensure efficient levels of both current assets and current liabilities are maintained so that the business has sufficient cash-flow at all times in order to meet its operating expenses and any short-term debt obligations.

Above can be accomplished by optimisation of working capital which can be achieved by,

Collecting Receivables Faster
Reducing Inventory Cycles
Extending Payment Terms

Practically, it is easy to plan working capital strategy but if not undertaken correctly, it can lead to increased supply chain costs as a result of higher shipment costs, loss of bulk discounts from suppliers and higher discount demands from customers.

So, in order to optimise a company’s working capital efficiently, the following steps can be undertaken

Receivables Collection

Keep an eye on slow paying customers and follow them for delayed payments
Identify cash rich customers and offer them initiatives for early payments, use data from credit rating agencies and in case of public companies use publicly available financials

Inventory Cycles

Workout the optimal inventory cycle for each product by comparing logistics costs versus inventory holding costs and potential loss from stock-outs
Adapt demand and supply procurement principle to ensure your business is never under-stocked or over- stocked; demand can be worked out by looking at historical trends, market conditions and future expectations.

Payment Terms Extension

Find out which supplier can afford payment extensions in the sense that a late payment from your business will not impact them negatively and negotiate extended payments terms with these suppliers

In Summary, Businesses must create a cash management culture. It involves managing cash flows in an effort to free up cash in both good and more difficult economic times which can ultimately lead to greater profitability, improved balance sheet and most importantly gain of control and flexibility which will give your business competitive advantage.

Need help in working out and implementing best strategy for your business's cash flow? Get in touch with us today

UK Micro-Entities Financial Reporting

Wed, 30 Oct 2019 01:16:48 GMT

Financial Reporting for UK Micro-Entities (FRS 105)

Small businesses can avail from FRS 105 which allows small companies in United Kingdom to report less detailed accounts. FRS 105 is a ‘Financial Reporting Standard’ issued by the ‘Financial Reporting Council’. It applies to accounting periods beginning on or after 1 January 2016.

Criteria for Micro-Entity

A company fulfilling two or more of the following qualifies as a micro entity

Turnover of less than £632,000 (this is adjusted if the financial year is longer or shorter than twelve months)
Balance sheet total is no more than £316,000 (Fixed Assets + Current Assets)
Number of employees are less than 10

Reporting Requirements

Small businesses need to publish following financial statements under FRS 105

Income Statement
Statement of Financial Position

- There is no need to provide detailed notes with these statements

- You just need to provide some basic information regarding transactions with company directors

Submission to HMRC and Companies House

The accounts will need to be filed to HMRC and Companies house every year under FRS105.

HMRC requires submission of Statement of Financial Position, Income Statement, and footnotes showing any director transactions.

Companies House requires submission of the Statement of Financial Position and the Footnotes.

The documents you submit will be published by Companies House on its website and can be viewed by anyone.

Circumstances when a micro-entity cannot apply FRS105

A micro entity cannot use FRS105 in the event where a third party has an interest in the company’s financial affairs and annual accounts, as accounts prepared under FRS 105 may not provide the level of detail that the third party requires.

In such situations, accounts should be prepared using FRS 102 as it requires more detailed information to be published in the accounts.

The above is just guidance and nothing beats getting expert advice. If you need help with small business accounting, you might benefit from a comprehensive accountancy service like ours, get in touch with us today at info@accountingassist.co.uk , www.accountingassist.co.uk

Types of Taxes a UK Business has to Pay

Sun, 27 Oct 2019 00:59:49 GMT

Types of Taxes a Business has to Pay

It is important to understand which taxes apply to your business along with remembering the deadlines as these can vary from business to business. Missing a deadline in submitting correct tax return can cost your business a financial penalty from HM Revenue & Customs (HMRC), hence it is always useful to take help from a small business accountant.

There are 4 types of taxes all of which or some of which will apply to a business depending on sector, size and performance of the business

1. Income Tax (IT)

2. Corporation Tax (CT)

3. Value Added Tax (VAT)

4. National Insurance Contributions (NIC)

Income Tax

Income tax applies to your business if you are operating as a sole trader i.e. self employed
You have to file your income tax return self assessment by 31st of January every year
Income tax also applies to limited companies as it gets deducted from employees’ salaries via ‘Pay as you earn (PAYE) and gets paid directly to HMRC. It is responsibility of company director to ensure deduction and paying of tax on any Salary/wages that are paid by the business
Income tax is paid on income exceeding £12,500 for each employee and profits exceeding £12,500 for self-employed
If your income is less than £1000 per annum then you don’t have to register with HMRC as a sole trader as this is covered by trading allowance but if it exceeds £1000 then you have to register but don’t have to pay tax until your income exceeds £12,500 per annum
For sole traders; taxable income is calculated after deducting all allowable expenses and then relevant tax rate will be applied on your income,

Taxable Income Tax Rate Income Tax Band

Up to £12,500 0% Personal allowance

£12,500 – £50,000 20% Basic Rate

£50,001 – £150,000 40% Higher Rate

£150,001+ 45% Additional Rate

Corporation Tax

Corporation tax applies to limited companies, in other words it is income tax for a company
Sole traders and partnerships don’t need to pay corporation tax
It is worked out as a percentage of a business’ profits after allowances, tax relief and all allowable expenses i.e. have been accounted for
Corporation tax rate is standardised for every company 19% which is expected to drop to 17% in 2020
Corporation tax, like income tax, is submitted through self-assessment
Corporation tax needs to be filed within 12 months after the end of a company’s financial year
Corporation tax bill needs to be settled before the end of nine months and 1 day from the end of a company’s Accounting year
Corporation tax return has go be paid before filing a company’s tax return at Companies House
New businesses who are in first year of trading as an incorporated business, usually have two accounting periods to take into account
In addition, businesses making over £1.5 million in profit have to pay their corporation tax in installments

Value Added Tax

A business has to be registered for VAT when its turnover exceeds £85,000
Some items such as children’s clothing, books, and items sold in charity shops are exempt from VAT and are classed as zero rated
Some other products and services incur a reduced rate VAT, such as home energy or children’s car seats etc
Full list of reduced rate and zero rate goods and services can be found at https://www.gov.uk/guidance/vat-exemption-and-partial-exemption

VAT Rate % VAT

Standard 20%

Reduced rate 5%

Zero rate 0%

National Insurance

National Insurance contributions (NICs) are paid by a business for its employees
NICs are also paid by self employed people to qualify for certain benefits such as your state pension or maternity allowance
NICs are paid for employees directly to HMRC at the same when PAYE is paid
There are four classes of NICs that apply to self employed individuals. Current rates for Class 1, 2 and 4 can be fund on https://www.gov.uk/national-insurance/how-much-you-pay

National Insurance Class Who Needs to Pay

Class 1 Employees earning more than £166 a week and under State Pension age. These are deducted automatically and paid by employer at the same time as PAYE. This is usually on the 22nd of the month

Class 1A or 1B Employers pay these directly on their employee’s expenses or benefits

Class 2 Self-employed people who earn more than £6,365 a year pay these via self- assessment.

Class 3 Voluntary contributions – These are paid to fill or avoid gaps in ones National Insurance record

Class 4 Self-employed people with profits exceeding £8,632 a year pay these via self-assessment

10 Accounting tips for new Businesses

Tue, 22 Oct 2019 21:24:02 GMT

1. Register your company with Companies House

2. Register your business with HMRC

3. Open a business bank account

4. Keep records from the start

4. Set up your financial record-keeping system

5. Cashflow is king so keep an eye on your credit terms

6. Stay compliant in terms of VAT, Payrol, RTI, Tax

7. Understand and implement VAT scheme suitable to your business

8. Understand your profitable customers

9. Keep track of your expenses

10. Organisation is key

Why Outsource Bookkeeping?

Sat, 19 Oct 2019 21:59:31 GMT

Why Outsource Bookkeeping

Confused about whether to outsource bookkeeping or not? The decision can be hard as fear of increased costs as well as thought of losing control can be daunting but the truth is that you can outsource your business’s bookkeeping and payroll without losing any control and the good news is that it doesn’t adds to the costs but actually helps reduce a business’s costs, let’s see how

1. Cost Effective

Outsourcing accounting operations can save your business money by eliminating benefit packages to a full time or part time employee as accounting firms have highly experienced staff who can fulfil your accounting needs at a fraction of cost. It can help you save bookkeeping, management reporting and payroll costs. Outsourcing of accounting services can save you up to 40% of your monthly costs.

2. Saves you time

Outsourcing of accounting operations frees up your valuable time which can be better used in your business’s core activity and bringing in new customers for your business. The thing is you didn’t start your business to waste time on books and back end office operations but you started it to go big and make money so why not get the distraction of in-house accounting out of your office by outsourcing your bookkeeping.

3. Accountants are experts

Accounting firms are run by professionals who know accounting inside out which mitigates risk of errors. They are up to date on rules and regulations as they have a client portfolio to serve. Staffing options are considered and executed by task, which gives you access to the most experienced and qualified individuals on your side, right where you need them.

4. Mutual Benefit

Your business is their business, if your business grows so does their and if your business goes down they lose their business so they work around the clock for success of your business.

5. Collaborative accounting is better

Accounting firms have teams of accountants working on your books so there is always backup available, Outsourcing your accounting operations enables you to afford you a team of people, all double-checking each other to ensure accuracy.

This also allows you to have your departments separate from each other. With just one in-house accountant will be hard to assess departmental expenses and accountability which ultimately compromises on quality. Whereas, outsourcing of accounting function provides you with a team of accountants which allows the fine-toothed comb to find more ways for you to keep your money.