Month: March 2021

accountant with laptop

15 things you didn’t know an accountant could do

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When asked “What does an accountant do?” many people answer with accounts, tax or compliance work. While that’s true, what many don’t know, is that the good ones do so much more. The best accountants will become a part of your team; they will give you strategic advice to save money and boost revenue, they will help you work more efficiently, and they will not only help you plan for your future, but they will help you get there.

To better answer the question, “What does an accountant do?” here is a taster of what they offer to you and your business.

Things an accountant can do…

  1. Launch a start-up

You need to know that your idea will make money and may potentially need to convince investors of the same thing. An accountant can do that for you plus work out your start-up and operating costs and create credible revenue forecasts.

  1. Manage your cash flow

Getting a stable and consistent cash flow is every business owner’s dream. An accountant can make sure that you always have the money there to pay staff and suppliers, as well as cash reserves in case of an emergency.

  1. Help make you more tax-efficient

Everyone knows that an accountant can help you complete and submit your returns at the end of the tax year. What many don’t know is that they can also help you to lower your tax ethically as well as helping you deal with old tax debts and making sure your books are watertight if you’re audited.

  1. Manage your debt

What loan should you choose? Should you use spare cash to pay back loans or reinvest in the business? An accountant can help you develop a specific strategy to manage debt in a way that is best for your business.

  1. Chase unpaid invoices

An accountant takes the ‘chasing money’ headache away from you by setting up an automated invoice system. When a payment is due or overdue, this will send out automatic reminders to your clients until they pay. Some accountants will even call clients who are very overdue with payments.

  1. Improve your business strategy

Yes, your accountant can help you figure out where you want to go and what’s important. They will work with you to set realistic personal, professional, and financial goals, and then they will measure your progress to help you achieve them.

  1. Budgeting and forecasting

Working off a vague set of numbers can result in irreparable damage to a business. With an accountant, you can work to an exact budget where you know exactly what is coming in and going out, and how much money you have to reinvest, and all in real-time. As well as having the figures at your fingertips, you will also know your figures that you’re aiming for and how long you could last in a crisis.

  1. Writing and pitching loan applications

Applying for a loan is a tedious and difficult process, but not with an accountant. They can pull together your numbers to help you write a solid application, not to mention give you the forecasting figures that will win over any loan officer.

  1. Help you with recruitment and payroll

Should you hire a full-time employee or outsource? Will your bottom line benefit more from a salesperson or a technician? Can you afford to hire and train a new employee? All these questions are important and should be handled with confidence. An accountant can help you make the best choices for you and your business and make payroll easy.

  1. Set up your cloud accounting software

Accountants aren’t stuffy number crunchers who speak a different language, they are tech-savvy and future-driven. Using the best tools out there, good accountants can help you automate your business’s accounting so that you’re always on top of your finances wherever you are. As well as implementing this software in your business, they can also train you to use it confidently.

  1. Help your business run more efficiently

In addition to accounting software, accountants can also help you unlock the power of other applications so that you can start working smarter, not harder. They can help you increase productivity with your invoicing, payroll, customer relationship management, staff scheduling and time-recording etc, and integrate all these tools together to create an effortless workflow.

  1. Improve your inventory management

Many business owners don’t realise how much money is lost due to poor inventory management. What an accountant can do is help you identify the cost of holding inventory and how much revenue is lost, so you can start to place accurate (and cost-effective) orders.

  1. Help you plan for the future

Do you want to sell your business in the future? Do you have a succession plan? Do you want to retire early? All these questions need to be addressed and planned for early on in your business journey. As well as helping you develop a plan for the future, an accountant will keep this larger goal in mind and will help you stay on track.

  1. Listen and support you

A good accountant will become an essential part of your team. They will be your financial advisor for all aspects of your life and will be there to listen and support you whenever you need them (not just appear in your life at the end of the tax year).

  1. Give you peace of mind

Your business, your finances, and the welfare of you and your family are probably the three most important things in your life. An accountant can help ease this pressure, giving you the reassurance and confidence that everything is being done or is planned for. The result? Peace of mind and being able to sleep soundly.

Money pot

More details on the March 2021 budget

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The UK budget took place on the 3rd of March 2021. Since then we have been getting more information through regarding the changes announced by the chancellor. Here is what we know so far:

CORPORATION TAX RATES TO INCREASE TO 25% BUT NOT FOR ALL COMPANIES

The UK corporation tax rate is currently one of the lowest rates of the G20 countries and the government states it is committed to keeping the rate competitive.

That should have the effect of encouraging companies to remain in the UK and companies to set up here. With other countries considering raising corporate tax rates the chancellor has announced that the UK will follow suit and consequently the rate will increase to 25% from 1 April 2023 where profits exceed £250,000. However, where a company’s profits do not exceed £50,000 the rate will remain at the current 19% rate and there will be a taper above £50,000. Businesses will however be able to take advantage of new tax breaks to encourage investment in equipment and an enhanced carry back of losses.

SUPER-DEDUCTION FOR INVESTMENT IN NEW EQUIPMENT

In order to encourage companies to invest in new capital equipment the chancellor announced a radical new “super-deduction” of 130% where they invest in new plant. This would mean that when a company buys plant costing £10,000 they would qualify for a £13,000 deduction in arriving at business profits. The new deduction, which will run for two years from 1 April 2021, will not be available for motor cars. Certain assets such as fixtures in buildings will only qualify for 50% relief in the first year instead of the normal 6% writing down allowance.

THREE YEAR CARRY BACK OF TRADING LOSSES

Many businesses will have made a loss in the last year as a result of the Coronavirus pandemic and the difficult trading environment.

Trading losses can normally only be set against profits of the preceding accounting period or previous tax year in the case of unincorporated businesses.

The chancellor has announced that the carry back period will be temporarily increased to three years thereby enabling the business to obtain a tax refund. For companies this will apply to loss making accounting periods ending in the period 1 April 2020 to 31 March 2022. For unincorporated traders, the extended loss relief will apply to losses incurred in 2020/21 and 2021/22.

The amount of trading losses that can be carried back to the preceding year remains unlimited for companies. After carry back to the preceding year, a maximum of £2,000,000 of unused losses will then be available for carry back against profits of the same trade of the previous 2 years. There will be a similar £2,000,000 limit for unincorporated businesses.

NO CHANGES TO INCOME TAX RATES AND PERSONAL ALLOWANCE FROZEN

The basic rate of income tax and higher rate remain at 20% and 40% respectively, and the 45% additional rate continues to apply to income over £150,000.

The personal allowance and higher rate threshold have been increased in line with inflation to £12,570 and £50,270 respectively for 2021/22. These thresholds will then be frozen until 2025/26 possibly yielding an extra £19 billion for the government.

There had again been rumours that the dividend rate might be increased, but dividends continue to be taxed at 7.5%, 32.5% and then 38.1%, depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate band. Note that the first £2,000 of dividend income continues to be tax-free.

NATIONAL INSURANCE RATES

The national insurance contribution (NIC) rates and bandings were announced 16 December 2020 to take effect from 6 April 2021.

Employees and the self-employed will not pay national insurance contributions (NIC) on the first £9,570 of earnings for 2021/22, an increase of £1 a week. The employee contribution rate continues to be 12% up to the Upper Earnings limit £50,270, with the self-employed paying 9% on their profits up to the same level. Note that employer contributions will apply to earnings over £170 per week, £8,840 per annum which is also a £1 a week increase.

5% VAT RATE FOR FOOD, ATTRACTIONS AND ACCOMMODATION EXTENDED

In order to continue to support businesses and jobs in the hospitality sector, the reduced 5% rate of VAT will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK until 30 September 2021.

The 5% reduced rate of VAT will also continue to apply to supplies of accommodation and admission to attractions across the UK.

From 1 October until 31 March 2022 the rate will be set at 12.5% and will then revert to 20% from 1 April 2022.

VAT REGISTRATION LIMIT FROZEN AT £85,000 UNTIL 1 APRIL 2024

The VAT registration limit normally goes up each year in line with inflation but will remain at £85,000 for a further two years. Arguably this makes it easier for businesses to assess whether or not they are required to register for VAT as it is no longer a moving target.

NEW GRANTS FOR HIGH STREET BUSINESSES AND HOSPITALITY SECTOR 

Businesses forced to close due to the Coronavirus lockdown will be eligible to apply for grants of up to £18,000 depending upon the rateable value of their business premises. Pubs, restaurants, hotels, gyms and hairdressers will be eligible for a grant of up to £18,000 per premises whilst non-essential retail businesses will be eligible to apply for a grant up to a maximum of £6,000.

The grants are intended to be a contribution towards the fixed costs of the business during the period that they have been unable to trade normally. Staff costs continue to be covered by the CJRS furlough scheme.

The government will also continue to provide eligible retail, hospitality and leisure properties in England with 100% business rates relief from 1 April 2021 to 30 June 2021. This will be followed by 66% business rates relief for the period from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021.

Unfortunately, the “Eat out to Help Out” scheme will not be reintroduced this Summer.

NEW RECOVERY LOAN SCHEME

The government have already announced a longer repayment period for “Bounce-back” and CBIL loans. From 6 April 2021 a new Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.

SDLT THRESHOLDS EXTENDED 

Last March in order to stimulate the housing market the Chancellor announced a temporary cut in Stamp Duty Land Tax for home buyers across England and Northern Ireland which was scheduled to last until 31 March 2021.

This has now been further extended until 30 June 2021 so that transactions in progress will continue to benefit from the reduced rates.

As a transitional measure from 1 July 2021 the Nil Rate Band of Residential SDLT in England and Northern Ireland will then decrease to £250,000 for 3 months until 1 October 2021 when it will revert to £125,000 for purchases completed on or after that date. There has been no change to the SDLT rates above the Nil Rate Band. The 3% supplementary charge for second and subsequent homes in England and Northern Ireland will continue to apply.

Note that there are different rates of tax on property transactions in Scotland and Wales as such taxes have been devolved in those countries.

5% MORTGAGE SCHEMES EXTENDED

Another measure announced to stimulate the housing sector is a new 95
% mortgage scheme guaranteed by the government that will mean that people buying a house will only need a 5% deposit where the purchase price is no more than £600,000.

APPRENTICESHIP SCHEMES EXTENDED

The current apprenticeship scheme will be improved with payments of £3,000 to employers in England for each new apprentice they hire aged under 25 and continue to pay the employer £1,500 for each new apprentice they hire aged over 25. The schemes will now run until 30 September 2021.

Starting in January 2022 there will be a new “flexi-job” apprenticeship which will allow individuals to work for more than one company via an agency.

The “Kickstart” Scheme announced in the Summer 2020 Plan for Jobs will continue to be available for the 2021/22 academic year to create 6-month work placements aimed at those aged 16-24 who are on Universal Credit and at risk of long-term unemployment. Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.

lady with tablet in factory

Self-employed Income Support Grants Extended

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In line with the further extension of the CJRS furlough scheme for employees the chancellor has also set out further support for the self-employed. We had been waiting for the details of the calculation of the fourth SEISS grant covering the period to 30 April and we now know that the support will continue to be 80% of average profits for the reference period capped at £2,500 a month and can be claimed from late April. There will then be a fifth SEISS grant covering the 5 months to 30 September.

The chancellor has also bowed to pressure to extend the scheme to include certain traders who were previously excluded. Thus, those who commenced self-employment in 2019/20 will now be included provided they had submitted their 2019/20 tax return by 2 March 2021. This is potentially a further 600,000 traders.

Conditions for the fifth grant will be linked to a reduction in business turnover. Self-employed individuals whose turnover has fallen by 30% or more will continue to receive the full grant worth 80% of three months’ average trading profits, capped at £2,500 a month. Those whose turnover has fallen by less than 30% will receive a 30% grant, capped at £950 a month. We are awaiting further details of this fifth grant.

Furlough

Furlough scheme extended to 30 September 2021

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The current version of the furlough scheme that started on 1 November 2020 was scheduled to end on 30 April 2021. In order to avoid a “cliff-edge” with resulting widespread redundancies the chancellor has announced a further extension of the scheme and also a phased reduction in support to employers. The CJRS furlough grant for May and June will remain at 80% of the employees’ usual pay for hours not working but it will then be limited to 70% for July and then 60% for August and September.

This phased reduction will operate in a similar way as in September and October 2020 with the employer being required to contribute the remaining 10% and then 20% of an employee’s regular pay so that they continue to receive 80% pay for furloughed hours.

In addition to the 10% and 20% contributions employers will continue to be responsible for paying employers national insurance and pension contributions on the full amount being paid to employees.

Leaves surrounding the title

4 steps to coping with overwhelming anxiety due to the coronavirus

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The Coronavirus pandemic has caused a lot of us to suffer from worry and anxiety over these past few months. Whether it’s been worry for our jobs, our families, our health or the uncertainty of the future, there has been a lot of negativity and panic and worry to be had. As the effects of the pandemic aren’t wearing off any time soon, we wanted to outline 4 steps that you can take to manage your anxiety as, if it’s left unchecked, it can build in the background and quickly overwhelm your everyday life and relationships.

Step 1 – Understand that anxiety is a normal reaction

With all the uncertainty and panic that is surrounding us right now, our brain’s natural response is to worry and to churn this worry around until we find a solution. The problem with that is that there is no real solution to the fears that plague us yet.

To deal with the anxiety that we feel, we first need to understand that this response is just a ‘protective mechanism’ in our brains. This is normal and we can change it.

Step 2 – Identify what is making you anxious

When we accept that this anxiety is normal, we then need to identify exactly what is making us anxious. Perhaps it is constantly hearing negative news? Perhaps it’s worrying about our finances or our children’s lack of education?

Whatever it is that is causing you to worry, identify it and write it down. After just a week, you should see a pattern emerging.

Step 3 – Take control of what you can

Some of these worries that you have will be practical worries and some of them will be hypothetical (the ‘what ifs’). Tackle the practical worries first.

Look at your list of things that are making you anxious and create an action plan for each one. Can you avoid any of your ‘anxiety triggers?’ Perhaps you can limit your exposure to them or you can outline steps that you can take to make them less of a worry.

When you’ve addressed all your practical worries, implement meditation and mindfulness into your every day routine to help with the hypothetical ‘what ifs.’

Step 4 – Put your self-care first

To help cope with stress and anxiety, you need to be sleeping well, eating healthy, drinking lots of water, exercising often, and taking time out to switch off and recharge.

If you take care of yourself then you will make better decisions and you will build positive habits.

Seperation between work and home life

How to keep a separation between work and home life

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Working from home has its challenges. On its own, that shift in environment takes some getting used to, especially if you’re used to working in an office, never mind having your partner or children there full-time as well! While space and distractions are common issues, the biggest challenge is that family and office life are overlapping, sometimes a little too much. Here’s how to keep work and home life separate as you work remotely.

Create a dedicated workspace

Having a completely separate workspace from the rest of the house is essential. It’s essential when it comes to productivity and focus, but also when it comes to switching off. Having a spare room is the most ideal, as you can shut the door at the end of the day and not be distracted by household chores when you are working. Obviously, this might not be possible for everyone, so decide where the most separate part of the house is.

Set your ‘work hours’

When do you work best? The world is your oyster when you work from home, so pick your hours. If that’s 6 am until 2 pm, you have the whole evening to fit in some exercise and good food. If it’s later in the day, then you can spend the morning home-schooling the kids. Whatever works best for you, set your hours and stick to them.

Tip: It’s a good idea to bookend your workday. What we mean by this is to find something that symbolises the start of your workday and the end. It could be starting your day with a coffee in your ‘work mug’ and then ending the day with a walk. 

Take a proper lunch break 

Schedule your lunch break and actually take it. You need nourishment for your brain to work at its optimum and a proper break does wonders for your productivity.

Get changed for work

You may be surprised, but you won’t be at your most productive if you’re working in your pyjamas! While your ‘work clothes’ maybe tracksuit bottoms and a slouchy t-shirt, that is fine. The most important thing is that you get changed out of what you slept in and into some fresh clothes to signal the start of the day.

Actually take a day off when you take a day off

We all need a day off every once in a while, especially when we are stuck indoors and the kids need home-schooling and the weekends don’t feel any different from the week… If you have planned a day off or you just want the weekends for family time, actually take the time off to recharge. Get your partner to hide your laptop or lock the spare room door if you have to. Just don’t get sucked into the “I just need to do one quick thing” void because the day will be gone before you know it.

Use your ‘commute time’ for self-care

One of the biggest positives about working from home is that you gain the time that you normally spend commuting! While it may be tempting to sleep a little longer, how about filling that time with things that will set you up for the day or help you switch off for the day? This could be meditating or exercising or taking it easy and reading a book. Whatever recharges your energy levels and releases serotonin (the happy hormone) for you, try to incorporate it into your daily routine.

Practice saying ‘no’

While learning to say ‘no’ to requests from clients is sometimes necessary, we are talking about saying ‘no’ to family and friends. Just because you are working from home, doesn’t mean your work isn’t as important. Explain this to your family and/or friends if they are requesting too much of you. Yes, your work is flexible, but you are still working 8 hour days. You’ll be happy to help them after your work hours!

Lower your expectations and don’t over-promise

Our expectations can be our downfall, so don’t set yourself up for failure. You won’t be working at your peak from home, especially with your partner and potentially your children at home, so don’t set high expectations for yourself. You won’t be able to keep a ‘show-home’ tidy house when everyone is stuck inside. You won’t be as productive as you would like so don’t over-plan or over-promise. If someone needs something, give yourself more time than you think you need and don’t be too hard on yourself generally.

Megaphone with speech bubble

What are the pros and cons of becoming self-employed?

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Self-employment is quickly becoming an area of interest for many people. It’s not surprising really when you hear that UK redundancies hit a record of 370,000 in the last quarter of 2020. As the unemployment rate rises to 4.9%, many people are looking at their options and wondering if now is the time to strike out on their own.

While being self-employed does come with a lot more control over your future, it is by no means a walk in the park. Here are the pros and cons of becoming self-employed.

Pros

  1. You can work when you want – you have the flexibility to decide your own working hours. Are you more productive very early in the morning? Then start early and finish early. As long as the work gets done, it doesn’t matter if you want to take Mondays off.
  2. You can work where you want – all you need is a phone, a laptop and a stable internet connection. This means you can define your own work environment, whether that’s at home, at a café or somewhere else in the world.
  3. You can choose the work that you want – you don’t have to work with frustrating clients, be around co-workers you aren’t comfortable with or work on mind-numbing and boring tasks. You are free to take on the work you are most passionate about and to decide who you want to work with.
  4. You could potentially make more money – your hourly rate is going to be much higher than what you would earn in a full-time job. If you’ve got a full schedule of work booked in, you could be making a lot more per month than you would be employed.
  5. You are always learning – running a business takes a lot of additional skills, so you will always be developing yourself. As well as business skills, you can also take more control over your own learning and development.
  6. You could benefit from tax advantages – many things become tax-deductible if it’s purchased for the sake of your business. These business expenses can even include a portion of your rent and house bills if you are working from home and any asset purchases such as cars.
  7. You have more control over your income – if you want to make more money, you can find more clients. Since you are responsible for your own income, this provides you with more of an incentive to work harder too.

Cons

  1. Hours can be long – you may enjoy your time off work less when you think this time could be spent earning. This may mean that you end up working far more hours than you did as an employee (especially to start off with).
  2. Being alone in your work environment – it can be lonely working entirely alone during the work hours for days and weeks at a stretch. Having no one to discuss work with or share victories or frustrations can be very difficult.
  3. You have to do everything – now you’re self-employed, you have to do all of the work, all of the marketing, all of the bookkeeping and so on. This not only takes up a lot of your time, but it can be quite stressful too. Especially since you can’t ask a colleague for help.
  4. There is no guarantee of work (or money) – unlike a 9-5 job, you don’t know what work you will be able to secure when and for how long. This often leads to a lumpy pipeline (i.e. not being able to win a job for months and then landing 3 at once).
  5. You could potentially make less money – being self-employed is difficult and requires a lot of self-motivation. If you don’t have the drive, then you’re going to earn less.
  6. You will have to work for free – running a business takes time, time to market yourself, quote for jobs, invoice clients, and managing multiple clients and your own schedule. This is time that you’re not getting paid for.
  7. You have no employment rights or a workplace pension – being self-employed means no sick pay, annual leave, workplace pension or company benefits (e.g. a company car, health insurance, gym membership etc). Essentially, any time not working is time not making money.

Self-employment isn’t all smooth sailing

Being self-employed may sound like heaven, but you alone are responsible for whether you fail or succeed. You get what you put in when you’re self-employed, and while this could result in more money and freedom, it takes a lot of self-discipline, motivation, and hard work to get there first.

money bags

Anti-money laundering and our clients

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Anti-money Laundering – sounds scary, doesn’t it?

Our governing body (AAT) requires us to follow strict guidelines to help us spot signs of money laundering. Although we trust our clients, we must follow all of the steps to comply with the regulations.

What is anti-money laundering?

Our team are all trained to spot the signs of money laundering. Each client will have an identification check and risk assessment completed at the point of onboarding and then every year thereafter. We have to be sure each client is correctly identified and that their income hasn’t changed dramatically without justification.

As we have to complete the reports each year we will require:

  • Up to date data on each client
  • Valid identification from each client

Due to the nature of accountancy, the police rely on us to report any suspicious activity. The rules are becoming much more strict and so as a regulated firm, we have to comply with the rules.

What do our clients need to do?

For our clients, all we need to know is that your data on our systems is correct and up to date. Therefore each year, every individual client will receive an auto email on the 6th of April. This will request the following:

  • Confirmation of your email address
  • Details of any name changes in the past year
  • Details of any changes in marital status
  • Details of any children born in the past year
  • Confirmation of your mobile number
  • Details of any address changes in the past year
  • Details of any plans to move home in the next year
  • Details of if of any changes to bank details
  • Details of any changes to personal circumstances

We will also request new copies of your ID if they are out of date, but these will only be requested if the ID we currently hold is no longer valid.

How we work 

At 1 Accounts we use a system called Karbon to request information we require from clients. At the end of the tax year on the 6th of April, we send out an automatic email requesting all the information we require to stay compliment with our anti-money laundering regulations. We then send an automatic reminder email once a month for five months to those who haven’t uploaded the information. If you still haven’t sent information after this, you will get chase emails from one of the team.

If you haven’t used our Karbon system before, it is nice and straight forward. All you have to do is click ‘manage checklist’ on the email.

Karbon checklist

This will then direct you to create a pin number (make sure it is memorable). If you forget your pin, just click on the ‘Forgotten your PIN?” hyperlink and follow the steps.

Pin number

Once you are in, you will be able to see a checklist where you can comment and upload the information we have requested, or ask any questions. These comments come through to the team like an email.

online checklist

Once you have completed a task we ask you to tick it off. The open tasks are what triggers the automatic reminders and so ticking them off will stop them.

If none of the information requests apply to you, we still need to write N/A in the comments so we know it doesn’t apply.

How to write N/A

Once you have completed your checklist and ticked off the tasks, please just log out or close the window. Your progress will be saved and we will be notified.

If you ever need any help completing these tasks, please email jade@1accounts.co.uk

piggy bank

The 2021 Budget

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For the last 12 months the chancellor has been pouring money to support the UK economy through the COVID-19 pandemic. The good news from yesterday’s budget is this isn’t stopping yet and support for business and the self-employed carries on for the next 6 months. We also know now how the chancellor is going to balance UK PLC’s books in tax rises. After all, the government’s borrowings have hit a peacetime record. Punitive tax measures will kick in from April 2023.

This blog contains a summary of the announcements of support for businesses, the self-employed and also how the government plans to boost public finances to pay for the COVID-19 support.

Here is the government’s press release from the budget if you want the full details.

Support for businesses: the key points

  • The furlough scheme continues to Sept 2021 across the UK. From 1st July the government will reduce the amount of an employee’s wage from 80%. Full details of the furlough payments available to businesses are available here.
  • From April 2021, the government is introducing a ‘super deduction’ tax credit scheme by 25p for every pound they invest in new equipment. This scheme will be in place for 2 years. We need to know the details of this scheme, but if you can delay any new equipment purchases until April 2021 it may be in your best interest to do so.
  • £5 billion for Restart Grants. These are a one off cash grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England.
  • A new UK-wide Recovery Loan Scheme offering loans between £25k and £10 million, plus invoice finance between £1,000 and £10 million will be available for all businesses to help with recovery.
  • VAT cut to 5% for hospitality, accommodation and attractions across the UK until the end of September 2021, followed by a 12.5% rate for a further 6 months until 31st March 2022.
  • Eligible businesses in the retail, hospitality and leisure sectors in England will benefit from business rates rising.
  • An extension of the apprenticeship hiring incentive in England to September 2021 and an increase of payment to £3,000. Plus a new “flexi-job” apprenticeship programme and an additional £126 million for 40,000 more traineeships in England.
  • Small and medium-sized employers in the UK will continue to be able to reclaim up to 2 weeks of eligible Statutory Sick Pay per employee from the government.
  • The current reduction in Stamp Duty Land Tax in England and Northern Ireland will continue until September 2021.
  • Individuals and businesses in Scotland, Wales and Northern Ireland continue to be supported by the UK Government through the Coronavirus Job Retention Scheme, self-employment grants, loan schemes and VAT cuts. Devolved administrations have received Barnett funding to provide support in areas of devolved responsibility.

Support for sole traders and self employed individuals

  • The UK-wide Self Employment income support scheme will be extended to Sept 2021, with the criteria relaxing so that more people can now claim for the first time. Here are the full details of the scheme.
  • The 4th SEISS payment will be based on your 2019/2020 tax return, and set at 80% of 3 months’ average trading profits. It will be capped at £7500 and paid out in 1 instalment likely to be available from late April 2021 to 31st May 2021.
  • This 4th grant is open to people who meet these criteria:
    • Traded in the tax years 2019 to 2020 (and submitted your personal tax return for this year) and 2020 to 2021
    • Trading profits under £50,000 and at least equal to your non-trading income
    • Are currently trading but are impacted by reduced demand due to the pandemic or the pandemic is temporarily stopping you from trading
    • Believe that there will be a significant reduction in your trading profits due to the pandemic
    • Plan to trade
  • There will be a 5th grant covering May to Sept 2021. The amount of this 5th grant will be determined by how much your turnover has reduced in the year April 2020 to April 2021. I.e. pre-pandemic vs pandemic. This 5th grant will be worth:
    • 80% of 3 months’ average trading profits, capped at £7,500, for those with a turnover reduction of 30% or more
    • 30% of 3 months’ average trading profits, capped at £2,850, for those with a turnover reduction of less than 30%

How will the government pay for this support:

  1. Here is the big one… Corporation tax in 2023 will go up to 25%. The good news is that businesses with a profit of £50,000 or less will continue to be taxed at 19%. And a taper above £50,000 will be introduced so that only businesses with profits greater than £250,000 will be taxed at the full 25% rate.
  2. R&D tax credit that a small or medium sized business can receive in 1 year is now capped at £20,000 plus 3 times the company’s total PAYE and NIC’s liability.
  3. The income tax Personal Allowance and higher rate thresholds will be frozen from April 2022 until April 2026.
  4. Inheritance tax thresholds will stay the same until April 2026
  5. Fuel and alcohol duty are staying the same for another year.
  6. The Lifetime Allowance for pensions will stay at its current level of £1,073,100 until 2026
  7. The adult annual subscription limit for 2021-22 will remain unchanged at £20,000.

The increases in corporation tax combined with the low dividend tax credit may mean that you could be better off by:

  1. Staying as self employed and not moving to a limited company or LLP
  2. Increasing the amount of PAYE you take from the business vs dividends for the tax year 2023/2024

As always, everyone’s individual circumstances are different. And we are here to advise you on the right business structure for you to trade depending on your current situation and plans for the future.