Category: Business Help

Yellow and pink zig zag

Can anyone get a tax enquiry?

Posted on | by Jade Donno

Each year HM Revenue & Customs (HMRC) undertake an enormous number of tax enquiries into individuals and businesses to check they have paid the right amount of tax. Since 2010 HMRC have strengthened their approach to enquiry work by using wider powers and sophisticated software and consequently a record £36.9 billion of additional tax revenue in 2019/20 up £2.4 billion on the previous year.

Moving forwards we expect to see an even greater increase in the number of tax enquiries as HMRC look to revoke the enormous £350bn government spend through the Covid-19 pandemic, as well as ensuring that measures put in place to support the economy through this period have been utilised correctly by taxpayers.

Tax enquiries can last for months, even years and defending you against HMRC’s detailed questions requires specific expertise and can be time consuming and costly. Indeed the cost of dealing with an enquiry can amount to thousands of pounds, even if no extra tax is payable.

But no need to panic…. 

All of our 1 Accounts monthly fixed fee services cover the additional professional costs of handling tax enquiries and compliance checks this is through our Tax Fee Protection Service. This is so our clients never have to worry that they will get a huge unexpected bill if HMRC decide to investigate.

As an additional benefit this protection also provides our clients with complementary telephone access to employment, health & safety and general legal advisors, including support from employers with any adjustments made in response to the Covid-19 pandemic.

What is a dividend

What is a dividend?

Posted on | by Jade Donno

“You can take a dividend” – That’s great, but what is a dividend?

The business world can be a big scary place, where people use lingo that you may not understand. However, some words and phrases sound far scarier than they actually are. We have noticed that the mention of dividends seems to scare a lot of our clients and having an accountant explain them can often lead to more confusion.

So, we thought we would let you in on the basics!

The definition of a dividend

“A dividend is a sum of money that a limited company pays out to someone who owns shares in the company.”

Dragons Den

To be able to take a dividend, you must be a shareholder owning a percentage of the company. You know on Dragons Den when they are haggling over percentages of the company ….. that’s the shares on which a dividend can be paid.

Limited companies can only pay dividends if they have enough accumulated profit, also known as retained earnings,  in the business to do so. The dividend payment comes out of profit after corporation tax. Even if the company has enough cash to pay a dividend, it is illegal for the dividend to be paid if there is no available profit.

Dividends should be distributed according to the percentage of company shares owned by each shareholder. So, if you own half the company’s shares, you should receive 50% of each dividend distribution.

How to take a dividend

The profit that the dividend is paid from can be from the most recent accounting period or from a previous accounting period, but the directors must have board meeting to minute they have checked there is enough profit available for distribution before they allow any dividends to be paid. Permitting a dividend to be paid is called ‘declaring’ a dividend.

If you are the only person … you still should have a meeting with yourself to check that there is enough profit in the business to take the dividend. Don’t worry, you don’t need to talk to yourself, just complete the check.

To be able to check if there is enough profit in your business to take a dividend. Your books HAVE to be up to date.

For every dividend payment your company makes you need to issue a dividend voucher to each shareholder that shows the following:

  • Date the dividend is paid
  • Company name and number
  • Name and address of the shareholder
  • Amount of the dividend and the number of shares held, including the rate and class
  • The dividend certificate number
  • The company year end the dividend relates to
  • Whether it is an interim or final dividend
  • Signed by an office holder

A copy of the voucher should be given to all recipients of the dividend amount and a copy kept for company records.

How dividends work

Stay with me here, there are some numbers;

Tokyo Ltd makes a profit of £1,000 in this current year. There is also some profit saved from previous years of £3,033 of which corporation tax has already been taken.

Thumbs up
Shrug sholders

Silene is the only shareholder of Tokyo Ltd and decides she wants to take a dividend. She sits down and works out that she can take the previous years profit as a dividend. She then works out she can also take the profit from the current year as a dividend, providing she accounts for the corporation tax. She takes away 19% of the £1,000 leaving £810 that can be taken. In total Silene takes £3,843 as a dividend.

She then created board minutes and a dividend voucher for her records. Silene is happy as she can now afford to go on that holiday that she wanted to book.

Plane tickets

How are dividends taxed

The limited company does not need to pay tax on the dividend. However the shareholders taking the dividend may have to pay tax personally dependent on their personal circumstances through their self-assessment tax return.

The limited company and the shareholder taking the dividend won’t need to pay national insurance on the dividend taken. This is why many business owners take a small salary and dividends.

Everyone gets a personal tax free allowance of £12,570 (for the year 2021/22), you can then earn an additional £2,000 in dividends before you pay any income tax on your dividends (for the year 2021/22). Once you have used up your personal allowance and the tax-free dividend allowance of £2,000 any further dividends received from any source will be taxed.

The amount of personal tax you pay on income from dividends is based on your tax band. The rates you pay are lower than the income tax rates you would receive if taking a salary, which is why it can be a tax-efficient way to pay yourself as a shareholder. Here are the rates:

Basic rate tax payer- 7.5%

Higher rate tax payer – 32.5%

Additional-rate tax payer – 38.1%

So in conclusion, taking a dividend can be a great way to pay yourself as a shareholder if your business is making a profit.

laptop

Do new small businesses need an accountant?

Posted on | by Jade Donno

According to business start-up statistics in the UK, 20% of businesses fail in their first year and around 60% will go bust within their first three years. Approximately 660,000 new start-ups register in the UK every year according to The Telegraph, so what are the reasons for such a high failure rate?

While there are many factors, the top two reasons start-ups fail is because:

  1. there’s no market need for their services or products, or;
  2. they ran out of cash.

These two reasons, like many of the others, could have potentially been avoided if they had consulted professionals early on in the process of setting up their business. Professionals such as accountants.

Here are 9 ways that new or early-stage businesses benefit if they consult an accountant earlier rather than later.

9 ways an accountant can help new businesses

They can help you…

  1. Identify whether your new business idea is feasible – an accountant can help you analyse your market research data to see if there’s enough demand for your product or service to sustain your business. They can also assist with outlining your business goals too.
  2. Decide on a business structure – choosing your business structure can impact your tax, personal liabilities, and asset protection etc. An accountant can help you choose the right one, saving you time and money in the process.
  3. Create a business plan – a big chunk of your business plan will be your financial forecast which outlines your business costs, revenue projections and the funding you will need. Naturally, an accountant is the best professional to help you with this cost analysis.
  4. Secure funding – accountants can advise you on which lenders to approach as well as helping you create your loan pitch. They can help you create an accurate and reliable economic forecast for your business.
  5. Register your business – you will need to register your business with the government and the Internal Revenue Services (IRS). An accountant can assist with this as well as registering you for tax, applying for licenses and permits you may need, and setting up your business bank account.
  6. Choose the best business insurance – an accountant can advise you on the best insurance options to ensure you have complete protection at the most cost-effective price. They can help with property and vehicle insurance to professional liability and business interruption insurance.
  7. Make the right recruitment decisions – from advising you on recruitment decisions (e.g. whether a part-time employee or outsourcing makes more financial sense) to helping you with payroll and auto-enrolment, accountants can help significantly when hiring employees.
  8. Set up cloud accounting software – accountants can help you run your business more efficiently by looking at your processes and advising on the most appropriate cloud accounting software. Some even offer migration, set up, and training services when it comes to software too.
  9. Plan for the future – great accountants become a trusted member of your team. They help you set your business goals and they provide you with ongoing advice and support throughout the years to help you achieve them.

Always seek an accountant’s advice when starting a new business

Failing to properly plan for the financial needs of a new business will undoubtedly lead to challenges. Challenges that could lead to the complete failure of the business if left unaddressed.

By getting an accountant involved as early as possible in the process, they can identify and mitigate any risks for you and help you budget and forecast your finances. With an accountant by your side, you’re far more likely to be a part of the 40% of new businesses that survive the 3-year mark!

alarm clock

How to break free from the ‘Groundhog Day Effect’

Posted on | by Jade Donno

We are coming up to a year now of being frozen in time. In fact, it’s starting to feel very much like the start of the pandemic where the government are talking about maybe lifting restrictions if the cases continue to fall. Even though it’s lockdown number three and 15 million people have been vaccinated against the virus, it’s still not looking like we’ll see normality any time soon.

Whereas we could break up the monotony of everyday life before the pandemic, we can’t just take a quick trip out of town or spend an evening at a friend’s house for some variety. We are still faced with this vast expanse of time where we can’t punctuate the end of the day, never mind the end of the week.

So what can we do? How can we break free from this groundhog day feeling, so that we can muster up the energy to make it through the next few months?

6 tips to mix things up

  1. Create a routine and stick to it – it might be boring, but a routine gives you a specific start and finish to your day. Without it, you will just aimlessly float through the days and this will make that groundhog feeling worse.
  2. Inject variety into your free time – while your routine during work hours may be the same each day, around that time is where you can be spontaneous and make each day different. While one evening, you may choose to take a bike ride, the next you could FaceTime a friend, take a bath or run some errands.
  3. Pick a skill to master – mastering a skill doesn’t only stimulate our brains (which is essential for our mental health), but it also gives us a goal and allows us to progress with something. Improving with something makes us experience growth and gives us a sense of control which is essential in this environment.
  4. Focus on exercise – exercise releases endorphins and serotonin (happy hormones); it helps us to sleep and actually gives us more energy. If you can, exercise for 10-30 minutes every day. You can mix it up with a walk one day, yoga the next, and a HIIT workout the next, whatever suits you.
  5. Be there for others – while you might not feel like you have the energy, try helping others. Check-in with your parents and grandparents regularly during the week or research how you can virtually volunteer or help a cause. Being kind will give your days more meaning and it will help you and the people you’re helping feel good.
  6. Seek help – if you’re struggling, don’t struggle alone. Ring a friend or seek support from your family. If you’d rather, reach out to an online Therapist. There are people who care about you and want to listen, and it’s okay to lean on them too. They might be able to provide you with some much-needed perspective.

Even small changes can go a long way

Some days will be harder than others, but even small changes can go a long way. Little things such as walking a different route every day can make you feel refreshed and ready to get back to work or juggling the family. Even if you feel like succumbing to that numbing and self-defeated feeling some days, try to do at least one thing that is different. You might just be surprised by the result.

accountant with laptop

15 things you didn’t know an accountant could do

Posted on | by Jade Donno

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.

lady with tablet in factory

Self-employed Income Support Grants Extended

Posted on | by Jade Donno

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

Posted on | by Jade Donno

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

Posted on | by Jade Donno

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.

Megaphone with speech bubble

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

Posted on | by Jade Donno

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.

'New school' accountants have replaced 'old school' bank managers for small businesses - blog

Have ‘New school’ accountants replaced ‘old school’ bank managers?

Posted on | by Jade Donno

We have an increasingly complex financial ecosystem, yet UK businesses feel that they have no one to turn to.  It’s not surprising, since we’ve seen a reduction in bank branches and bank managers over the past 20 years, but what business owners don’t know is that they do have someone. To help SMEs in a way that banks never could, accountants are stepping up to fill this gap. They are bringing back the relationship-driven, trusted advisor role to the businesses who miss it.

Here is how accountants are taking the place of old school bank managers.

The bank manager is dead…

Around 20-30 years ago, life seemed a lot simpler. If you were in business and you wanted a loan or to open an account, you would just head to a high street bank (most likely the same one where you had your personal account, mortgage, savings accounts and even investments). Your efforts usually resulted in an overdraft and the add-on of a relationship manager.

This was a win-win relationship. Business owners had a bank manager who they could come to about anything from finances to providing a better relationship, to their service and growing their business. In return, bank managers had clients who didn’t just come to them for a one-off shop (e.g. a loan). They were loyal customers and did their full weekly shop with them every week (e.g. accounts, mortgage etc).

Fast-forward to today and there has been a massive reduction in bank branches (almost 3,000 branches across the UK closed between 2015-2018 alone). And for the banks that are still operating, they have moved up the ‘food chain.’ Not all banks, but the majority have digitised and have reserved their face-to-face services for the bigger businesses who are bringing in more money.

The result of this is that thousands of SMEs have been left without a trusted advisor. They have been left to make crucial financial decisions based on limited or poor information, and don’t know where to turn. In essence, to smaller business owners, the bank manager is dead.

Long live the accountant!

According to a survey by Capitalise, 98% of business owners said that they had no idea who their bank manager was and that, at best, they have a call centre. This shows that banks are falling short of providing a long-term solution to replace the role traditionally filled by the Bank/Relationship Manager.

Business owners may have lost this relationship element from their banking service, but what many don’t know, is that their accountants can offer this and more. SMEs need guidance across the entire financial landscape, including personal decisions as well as business, and this is where accountants thrive.

Accountants are uniquely positioned to be the new gatekeeper for smaller business owners. They know their small business clients best so can easily step into this role of ‘Trusted Financial Advisor.’ A seemingly ‘old school’ and obvious solution, we know, but accountants have evolved over the years while the banks seemed to have devolved.

Where do business owners go for help?

Long story short, if you are one of the many business owners who miss a relationship-driven service rather than a transactional one…if you need a professional advisor who you can talk to openly and honestly about anything…if you want guidance to come up with the best financial solutions to satisfy your specific business needs…you can turn to your accountant.

They should be your first port of call for any question or query that you have. Do you need a personal mortgage renewal? Call your accountant and they will manage this for you and make the best introduction.

Your accountant can help you with everything that an old-school bank manager would, and more:

  • Very first point of contact as your trusted advisor and someone you can call or sit with.
  • Funding solutions – debt, loans and data-driven finance applications.
  • Cash flow management – accounts, reviews, and forecasting.
  • Business advisory discussions.
  • Quality referrals – accountants connect with people daily and grow their network/client base.
  • Business introductions – insurance, pension advisors, bank accounts, business succession/exit.
  • Personal wealth and finance introductions – mortgages/investments/pension.
  • Business growth – implementing and training for cloud accounting programmes that increase efficiency and facilitate growth.

Next time you need business or personal advice, talk to your accountant first. They can give you invaluable support in the 4 key areas of business (people, sales, service, and risk). Plus, unlike the old-school bank managers, they still put the relationship first. This means that they are in a position to give you the best guidance and support as they know you, your business, and your needs as well as their own.