Category: Accounting News

jumper, hot chocolate and book for autumn

Simplifying the Autumn Statement

Posted on | by Jade Donno

Hello, business owners! Let’s talk about what the UK Autumn Statement means for you in plain English, with all the important bits you need to know:

Our director Paul breaks down the Autumn budget with a quick synopsis

Cash Cushion for Growth

The government has a safety net of funds aimed at supporting businesses making sure they can grow. They’ve introduced 110 measures to help businesses with things like productivity and taxes​​. This is collated in a 120 document you can click here to read.

Drinks on Hold

If you’re in the business of selling drinks, there’s good news – no tax hike on alcohol until August 2024. Cigarette sellers, however, will see a 10% tax increase​​ on hand-rolling tobacco.

Friendly Rates for Small Businesses

If your business is on the smaller side, you’ll be glad to hear that your business rates won’t go up this year. And if you’re in retail, hospitality, or leisure, you’ll continue to enjoy a significant reduction in business rates​​.

Full Speed on Spending

When you buy equipment for your business, you can now get a tax break for the full price from now on. This should make investing in your business a bit more attractive​​.

Simpler Tax Breaks for Innovation

If your business invests in research and development, things are getting simpler. The government is merging two tax relief schemes into one, making it easier to understand and claim your benefits​​.

Cheer for Creative Types

For the creatives making films, TV shows, or games, there’s a new tax credit system starting in 2024 that may put some extra cashback in your pocket​​. We are awaiting the details on this one!

National Insurance Cuts

Big news for both employees and the self-employed: National Insurance is getting cheaper. Employees will see a 2% cut from their National Insurance rates, and for the self-employed, Class 4 NI goes down by 1% to 8%. Plus, a certain type of National Insurance payment, known as Class 2, will be abolished, making tax a bit simpler for the self-employed​​.

More Money in Your Pocket

With all these changes, if you’re earning an average salary, your taxes will be lower in the UK than in many other major economies. This means more take-home pay for millions of workers​​.

Minimum Wage Jump

Last but certainly not least, if you’re paying your staff minimum wage, note that it’s going up to £11.44 from April 2024. This is a significant raise, which means those earning the minimum will take home more money​​ but it also could be a huge change for your business. Making it more important than ever to plan!

Listen to Paul talking about the impact on small businesses by watching this video.

Remember, all these changes are about making sure that work pays off more and that your business can thrive. It’s always a good idea to chat with an accountant to see exactly how these changes affect your specific business. Stay informed and keep growing!

Please check out our social media for more videos breaking down the budget!

leaves for autumn

Understanding the Autumn Statement and Its Impact on Your Business

Posted on | by Jade Donno

The Autumn Statement is more than just a financial forecast; it’s a roadmap that can influence your business decisions for the upcoming year. At 1 Accounts Online Ltd, we understand its significance and are here to simplify what it means for you.

What is the Autumn Statement?

This annual announcement by the Chancellor of the Exchequer outlines the government’s economic plans and budget priorities, giving us insight into the fiscal direction of the country.

The Importance of Staying Informed:

  • Business Forecasting: Economic indicators from the Statement guide us in helping you plan your next business move.
  • Policy Updates: It’s essential to know about changes in taxation or spending that may affect your business’s bottom line.
  • Strategic Advantage: With our expert analysis, you can turn the information from the Statement into a competitive edge.

Impact on Your Business:

  • Corporate Tax Rates: Any changes here could be critical to your financial strategy, and we’re on hand to navigate through them​​.
  • Regulatory Adjustments: We’ll decode complex legislative updates, such as IR35 changes, so you can focus on running your business​​.
  • Fiscal Signals: Tax cuts or adjustments in government spending signal economic trends that could impact your growth plans​​.

The Autumn Statement is a vital indicator for strategic business planning, and we at 1 Accounts Online Ltd are dedicated to providing you with clear, actionable advice. As we approach the release of this year’s Statement, let’s work together to align your business with the upcoming economic landscape.

jade and paul in a meeting

Are You in the Crosshairs of the Associated Company Tax Rates?

Posted on | by Jade Donno

We’re back with another blog post and this time we’re diving into a topic that isn’t everyone’s cup of tea – taxes. But don’t worry, we’re here to make it as enjoyable and straightforward as possible. Strap in and let’s demystify the new corporation tax rules together.

What are the changes?

As of April 1st, 2023 (and no, it wasn’t an April Fool’s prank), there have been some significant changes in the corporation tax laws. Here’s the lowdown:

  1. Companies with profits that are playing a bit of hide and seek and total less than £50k will continue to be taxed at the friendly rate of 19%.
  2. Those with profits feeling a bit more confident, between £50k and £250k, will be greeted by a still reasonable tax rate of 26.5%.
  3. And for those brave souls whose profits exceed £250k, they’re looking at a flat rate of 25%.

Now, you might be wondering about this £50k threshold we mentioned. It’s not as roomy as it first appears. Much like sharing a dessert, this threshold needs to be split between your company and any other associated companies. The effect? Well, your slice of the pie could be smaller than you initially thought.

Fear not, your trusted accounting partners, should be on the case and we’re here to guide you through this labyrinth. Your accountant will need to know about any other companies you’re involved with, either as a shareholder or director. The same goes for any companies your family members are involved with. This isn’t us accountants just being nosy, promise! It’s all to ascertain whether the associated company rules apply to you and potentially other connected businesses.

We understand that these changes may feel a bit like navigating uncharted waters. If this is going to cause any tax-related stress, rest assured that we’re prepared to assist. We can work with you to plan the most tax-efficient course.

So, let’s sail through these tax changes together. As always, we are committed to lightening the load of tax law changes and making the journey as smooth and pleasant as possible.

Stay tuned for more updates and remember to keep those smiles on. After all, nothing is as certain as change… and taxes!

what are capital allowances

What are capital allowances?

Posted on | by Jade Donno | Leave a Comment on What are capital allowances?

Are you ready for some capital allowances fun? 🙌 🥳

Yeah, we know it’s not the most exciting topic, but stick with us because it’s important. Capital allowances are like the superhero of the UK tax system, providing businesses with tax relief on certain types of capital expenditure. However from April 2023, they’re changing! 

Super Deduction

First up, we have the Super-Deduction. This is a type of capital allowance that provides businesses with a 130% tax deduction on qualifying investment in new plant and machinery. That’s right, you heard us, 130%! It’s like getting an extra boost of power to your capital expenditure. This is designed to help businesses invest in new equipment and machinery, and has been a game-changer. 

But you better act fast because the Super-Deduction is only available for investments made between 1 April 2021 and 31 March 2023. So, if you’re planning to upgrade your plant and machinery, make sure to take advantage of this superpower before it’s too late. 

Special Rate Pool 

Next up, we have the Special Rate Pool, which is used for assets that are eligible for a lower rate of capital allowances. While it’s not as exciting as the Super-Deduction, it’s still an essential part of the capital allowances world. From April 2023, the rate for the Special Rate Pool will be reduced from 6% to 3%. It’s not ideal, but hey, we can’t win them all. 

Annual Investment Allowance

Moving on to the Annual Investment Allowance (AIA), which provides businesses with 100% tax relief on qualifying investment in plant and machinery, up to a certain limit. The good news is that the AIA limit is staying the same at £1million of capital expenditure. 

General Pool Allowances

Last but not least, we have General Pool Allowances. This allows businesses to claim tax relief on assets that don’t qualify for the AIA or exceed the AIA limit. From April 2023, the WDA rate will be reduced from 18% to 16%. It’s not a significant reduction but still something worth being aware of.  

In conclusion, the world of capital allowances is evolving from April 2023. But, as with any superhero story, there are some ups and downs. The Special Rate Pool and General Pool Allowance are getting a little weaker, while the super deduction is leaving us. So, make sure to plan your capital expenditure carefully and consult with a tax professional to ensure that your business is making the most of the available allowances. 

march budget update

The March 2023 Budget Explained

Posted on | by Jade Donno | 1 Comment on The March 2023 Budget Explained

The Chancellor announced his March budget today.

 

Similar to the budgets, autumn statements and ‘non-budget’ statements of the last few years we knew most of the details in advance. What we did find out yesterday is that UK PLC is in a better position than feared. It is believed that inflation will fall to 2.9% by the end of 2023. 

 

However, finding staff is a problem faced by most small businesses. This budget was the Chancellor’s way of helping alleviate this shortage. He has done this by:

  • Providing more funded childcare. 30 hours a week of free childcare is being extended to working parents of 1 and 2-year-olds. 
  • Increasing the pensions lifetime allowance from £1.07m to £2m
  • Increasing the amount people can pay into a pension tax free, i.e. from £40k per year to £60k per year.
  • Providing more money to schools to help with wrap-around care

 

Whilst these will help, the question is whether they are going to provide the much-needed increase in people going back to work? 

What was hoped was that the chancellor was going to stop the planned corporation tax rise from 19% to 25% for businesses earning between £50k and £250k in profits. Sadly, this tax rise and all its complications still take effect. These will prove very punitive if you run multiple businesses. 

 

What there was in the budget were the following announcements which will help businesses:

  • The 5p reduction in fuel duty is being extended for another year.
  • The energy price cap freeze at £2500 for consumers will be extended for another 3 months. I.e. until the end of June 2023
  • The Energy Bills Discount Scheme is being maintained until 31st March 2024 for all eligible businesses.
  • The 130% super deduction tax for investments in plant and machinery which stopped at the end of march is being retained but at the 100% level but with full expensing. 
  • 12 investment zones which will attract tax reliefs and grant funding
  • Small companies who spend over 40% of their costs on R&D will receive £27 from HMRC for every £100 of R&D investment.

 

What is full expensing?

In 2021, the government introduced the super-deduction to go further to encourage companies to invest. This was due to end on 31 March 2023. The government is now introducing full expensing, a 100% First Year Allowance, from 1 April 2023 until 31 March 2026. 

For investments in qualifying plant and machinery such as IT equipment the cost of these are normally taken over a period of years. I.e. If a laptop cost £1000 and was seen to last 10 years, its cost would be taken over a 10 year period. I.e. £100 per year. Whereas with full expensing, the £1000 cost can be taken in the year it was incurred. 

 

What do you need to do now?

Given the extra costs the government has now imposed on your small business AND the rising cost of energy bills AND the minimum wage increases AND the 10% inflation rate across 2023, you have work to do. Namely:

 

  1. If you haven’t already put together your business plan for 2023 and model the impact of rising costs. Do you need to:
    1. Increase your prices?
    2. Reduce your overheads?
    3. Increase your wages?
  2. Carefully look at your personal and business tax situation. For example:
    1. Would you be personally better off if you paid yourself more via PAYE or made more pension contributions? (particularly now you can add £60k into your pension pot each year tax free)
    2. Would closing your limited company and trading as a sole trader now make more sense?
  3. Who in your staff needs a pay rise to avoid falling foul of the rise in the National Minimum Wage?

 

Of course, give us a call if you need help with any of these next steps. We are here to help.

The Autumn Statement

Posted on | by admin | 1 Comment on The Autumn Statement

The Chancellor announced his Autumn Statement yesterday. 

We already knew that he was going to raise taxes and reverse most, if not all of the Truss Budget.

Indeed, the Chancellor set out his priorities as Stability, Growth and Public Services.

What this means is that we are back in Austerity 2.0 mode. Oh, and inflation is still going to be running at 10% across 2023.

This new fiscal direction isn’t good for small business owners. UK Plc needs repaying for all the money it gave or lent to businesses to support the economy during the Covid-19 pandemic. Yes, furlough payments, Bounce Back Loans and such like all need to be repaid.

Sadly, the chancellor has taken a swipe at small business owners and decided that this is the population that will take the brunt. After all, we small business owners don’t have a union supporting us to strike. Plus, we are a resilient bunch of people and will roll our sleeves up to get through these tough times.

The leaked and previously announced tax increases are still going ahead…

  • Corporation tax from April 1 2023 to increase to 25% for companies with profits over £250,000. Companies with profits under £50,000 will be taxed at 19%. Companies with profits between £50,000 and £250,000 will be taxed between 19% and 25%.
  • Still support for energy bills. After April 2023 the Energy Price Guarantee will go up to £3000 per year for a ‘typical’ household.
  • Income tax and National Insurance contributions thresholds are staying the same until April 2028.
  • The Upper rate tax band threshold will be lowered from £150,000 to £125,140 from 6th April 2023.

Remember that small business owners bared the brunt of the tax increases? Well here is the sting in the tail

  • The National Living Wage will increase by 9.1% for individuals over 23 to £10.42 and the National Minimum Wage rates are all increasing by 9-10%.
  • The dividend allowance is being reduced from £2000 to £1000 in April 2023, then to £500 in April 2024.
  • The Capital Gains Tax Annual Exempt amount is being reduced from £12,300 to £6,000 from April 2023 and to £3000 from April 2024.
  • The National Insurance Secondary Threshold, i.e. the level at which employers start to pay Class 1 Secondary NICs for their employees, will be £9,100 from April 2023 until April 2028.
  • The R&D tax relief is changing from 130% to 86% and the SME credit rate will decrease from 14.5% to 10%. This takes effect from the Autumn Finance Bill 2022.
  • From April 1st 2023 business rates will be reevaluated to take account of a rise in property values since 2017.

Inevitably the Chancellor has decided that electric vehicles need to now pay road tax. This means that:

  • Electric cars and vans will now pay road tax from 2025.
  • New electric cars registered in 2025 will pay £10 in road tax for the first year then move to the standard rate.
  • Existing electric cars will pay the standard rate from 2025.
  • The exemption for electric cars for the expensive car supplement has also been removed. This means electric cars costing over £40,000 will pay an (at current rates) extra £355 per year on top of the normal road tax of £165 per year.
  • The benefit in kind tax for electric cars is going up to 5% by 2027/2028, with an increase of 1% per year taking effect in 2025/2026 until the 5% level is reached in 2027/2028.

Small crumbs of comfort here are that you still get the 100% first-year allowance for electric vehicle charging points.

Having read all of this you would be perfectly entitled to think that there is no good news for small business owners. And, well, you’d be right to think that. What the government did announce was:

  • No introduction of a possible Online Sales Tax.
  • The business rates multipliers will be frozen in 2023-24 at 49.9p and 51.2p.
  • There is a transitional relief scheme for business rates to support the changes in business rates from the reevaluation in 2023.
  • There, maybe, more energy price support for business announced in the Spring Budget.
  • The reversing of the increase in National Insurance rates for employees (that started in Nov 2022) is still going ahead.
  • There is still the £5000 National Insurance Allowance for small business owners.

What do you need to do now?

Given the extra costs the government has now imposed on your small business AND the rising cost of energy bills AND the minimum wage increases AND the 10% inflation rate across 2023, you have work to do. Namely:

  1. Put together your business plan for 2023 and model the impact of rising costs. Do you need to:
    1. Increase your prices?
    2. Reduce your overheads?
    3. Increase your wages?
  2. Carefully look at your personal and business tax situation. For example:
    1. Would you be personally better off if you paid yourself more via PAYE or made more pension contributions?
    2. Would closing your limited company and trading as a sole trader now make more sense?
    3. Do you need to put in motion anything to avoid getting caught by the reduction in capital gains allowance in April 2023, e.g. selling your business or property?
  3. Who in your staff needs a pay rise to avoid falling foul of the rise in National Minimum Wage?

Of course, give us a call if you need help with any of these next steps. We are here to help.

Jeremy Hunt makes changes

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Here is another blog with yet more changes and reversals to the Kwarteng mini-budget that wasn’t a budget.

In short, most of what he announced has been ditched by the new chancellor Jeremy Hunt.

I am hesitant to say that these new announcements are ones that are going to remain. After all, we are living in “interesting times”. Things could change still further by the time we get to the 31st of October when the chancellor will reveal the full financial statement.

What we know now:

  • The basic rate of income tax remains at 20% and likely to stay there for the foreseeable future.
  • The 45% higher tax rate is here to stay.
  • The planned reversal in the increase to Dividend Tax which took place in April has been cancelled.
  • The repeal of the 2017 and 2021 changes to off-payroll rules, AKA IR35, is now cancelled. This means the burden of proving that a contractor is not a disguised employee now rests again with the employer.
  • The help with energy costs is still going ahead but only until April. From April there is likely to be a different and more targeted regime to help with energy costs.
  • The planned increases in the duty rates for beer, cider, wine and spirits will now go ahead.
  • VAT free shopping for non-UK visitors scrapped.

You may be pleased to know that the cuts to stamp duty and National Insurance remain in place. These are very small crumbs of comfort.

The likelihood is that there will be more announcements on the 31st October.

We will, of course, then, give you a full rundown of any changes which will impact you or your business.

Our thoughts:

It’s aint over until the fat lady sings. At the moment we seem to have no idea whether the lady in question is clearing her throat or even thinking about going to perform.

What is clear that the Conservative government is in turmoil right now. The politic gossip columns are humming with different leadership scenarios. None of which seem to involve Liz Truss in them…

Initial reactions from the markets seem to be positive about Jeremy Hunt’s new plans for GB PLC. At time of writing the pound was making tiny gains against the dollar. But still a long way off the dizzy exchange rate heights in August of US $1.20 dollar to the pound. Bear in mind that at this point last year £1 would buy you US $1.37.

As a fellow business owner, my hope is for some stability and certainty in the months ahead. After all, that is what we all need to be able to plan and take decisions for the future. However, my sense is don’t assume that we are now entering into stable waters.

This is what I still think we can rely on going forward:

  • The cost of living crisis is going to bite hard over the winter
  • It is important to keep an eye on your business’s cash going forward
  • It will be harder to get access to finance
  • The turmoil will bring opportunities for business owners who are managing their finances carefully and prepared to be bold and take good decisions.

If you are uncertain about what the future holds or how to cope with the headwinds coming your way, then get in touch. We are here to help.

Government makes a U-turn

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On Friday afternoon the UK Prime Minister, Liz Truss held a press conference. Ahead of this press conference, it was announced that the Chancellor had resigned/been sacked (depending on whose version of the truth you are listening to).

In this press conference, the September tax cuts as promised in the mini-budget have been watered down even further.

What we know so far… 

The Corporation Tax will rise from 19% to 25% in April 2023. It is unclear whether or not that includes the previous 19% tax rate for profits under £50k, with a tapering of tax rates up to £250k profit.

As already announced the removal of the 45% top rate for high earners has been scrapped.

What is still, apparently, going ahead from the mini-budget is:

  • The income tax basic rate cut by 1p to 19p in April 2023
  • The scrapping of the 1.25% rise in National Insurance is from November 2022 is still going ahead.

Our thoughts:

Hang onto your hats for a while longer. It is clear that the Conservative government is in turmoil right now. Read any of the online news sites and you will see speculation about whether Liz Truss can keep her job as Prime Minister. Or whether the new chancellor, Jeremy Hunt, will become a caretaker leader.

As a fellow business owner, my hope is for some stability and certainty in the months ahead. After all, that is what we all need to be able to plan and take decisions for the future. However, my sense is we are far from the stability we require.

This is what I think we can rely on going forward:

  • The cost of living crisis is going to bite hard over the winter
  • It is important to keep an eye on your business’s cash going forward
  • The cost of borrowing is going to increase as interest rates increase
  • It will be harder to get access to finance
  • The turmoil will bring opportunities for business owners who are managing their finances carefully and prepared to be bold and take good decisions.

If you are uncertain about what the future holds or how to cope with the headwinds coming your way, then get in touch. We are here to help.

Mini Budget 2022

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Last week, as part of the mini-budget, the government began announcing help for small businesses. This blog gives you the details of what matters and how this could impact your business.

At a top level, the mini-budget, the government’s Growth Plan and announcements on energy caps are very good news for small businesses. Excuse the pun, but in many ways, the government has put its hand into its pocket to keep the lights on for small businesses this winter. It’s also changed decades of fiscal discipline and if you believe the media and political pundits it is a very risky move. After all, the government still needs to pay back what it borrowed to support individuals and businesses during the worst of Covid-19.

At a glance, these are the changes that impact you and your small business:

Income tax: Not including Scotland

  • The basic rate has been cut by 1p to 19p from April 2023.
  • From April 2023, the higher rate of Income Tax, 45%, has been scrapped.

Corporation tax: 

  • The planned increase in corporation tax from 19% to 25% has been scrapped.
  • This means that from April 2023, the rate will remain at 19% for all firms.

National Insurance: 

  • The 1.25% increase in National Insurance introduced in April 2022 has now been scrapped. I.e. from November 6th 2022.
  • The Health and Social Care Levy due to be introduced in April 2023 has been scrapped.
  • No change to the threshold that individuals pay National Insurance, i.e. £12,570
  • Eligible businesses still get up to £5000 in employment allowance to reduce their annual National Insurance Liability.

Dividend tax: The 1.25% increase to rates introduced in April 2022 has been reversed from April 2023

Annual investment allowance: The temporary increase from £200k to £1m has been made a permanent increase. This gives 100% tax relief to businesses on their plant and machinery investments up to £1m.

IR35 rules changed: The 2017 and 2021 changes to off-payroll working are to be repealed from April 2023. This means workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and National Insurance contributions.

Company Share Option Plan: From April 2023 companies can now grant up to £60k (up from £30k) of share options to each eligible employee.

Seed enterprise investment scheme (SEIS):

  • The amount a company can raise under SEIS has been raised from £150k to £250k
  • The amount an individual can invest in SEIS shares has been doubled from £100k to £200k
  • The scheme has been extended to companies with gross assets under £350k

Energy price guarantee and Energy Bill Relief Scheme:

Businesses will pay no more than £211 per megawatt hour for electricity and £75 per megawatt hour for gas. This applies to all energy supply contracts entered into after 1st April. The energy companies will apply the discount. The energy bill relief scheme will operate until March 31st 2023 and potentially be extended after this date for businesses in certain sectors.

Under the energy price guarantee, the highest amount domestic households will have to pay is 34p per kWh of electricity and 10.3p per kWh of gas. The standing charge – the fee customers pay for being connected to the energy grid – will be 46p per day for electricity and 28p per day for gas. This energy price guarantee will last 2 years. A typical household can expect to pay about £2500 a year for their energy.

Investment zones: These new investment zones will benefit from tax incentives, planning liberalisation and wider support for the local economy.

VAT-free digital shopping scheme for visitors to the UK: Visitors to the UK will be able to claim back VAT on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage. The date for this scheme to go live is currently unknown.

What you need to do now?

Payroll

If you run your own payroll, then you will need to check that your payroll software provider will be implementing the changes to National Insurance in time for November. If we run your payroll, we will ensure that the changes happen seamlessly.

Personal tax return

The changes to income tax rates and national insurance take effect for the 2022/2023 tax year. They will not impact your personal tax bill for the 2021/2022 tax year. With 2 rates of National Insurance, this will make your 2022/2023 personal tax return more complicated than normal. Please contact us if you would like us to do your personal tax return for the 2022/2023 tax year.

Do a new budget and reforecast your cashflow

The energy price guarantee and changes to employers’ national insurance rates mean that your business’s costs have materially changed for the year. Please contact us if you want help to see how this changes your business’s cost structure going forward.

Revisit your personal and business tax planning strategy

This was anything but a mini-budget. It is a massive change in fiscal policy and direction. This means you may need to rethink your personal and business tax planning strategy going forward. Changes, in particular to the SEIS scheme, may mean there are more tax planning options now open to you and your business. Once again get in touch with us if you have any questions or need help.

New National Insurance threshold comes into effect from 6th July 2022

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Back in his Spring Statement in March of 2022, then Chancellor Rishi Sunak announced significant changes to National Insurance. The first of which came into effect in April when NI contributions were raised from 12% to 13.25%.

What is changing in July?

This month sees some respite however with the implementation of Sunak’s second change; a raise of the primary threshold for National Insurance. From July 6th this has been raised from £9880 to £12,570, bringing it in line with the personal allowance for income tax for the first time.

This change means that anyone earning less than approximately £35,000 will pay less National Insurance this year, and employees will see this change reflected in their pay this month. The Prime Minister has stated that this will mean the average worker will receive a tax cut of £330 a year. If you earn below this threshold then you will no longer pay National Insurance contributions at all. If you are a higher earner however, you will still be paying more National Insurance than you were last year.

Will this help the cost-of-living crisis?

Taxes are still at their highest rate for 40 years and the cost of living crisis continues to grow. With a new Chancellor in place it will be interesting to see what, if any, changes he makes to ease the pressure on low and middle earners. We will have a full report of the Autumn statement when it is given, and in the meantime will continue to update you as soon as anything changes.