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1 Accounts Haverhill Capital Gains Tax advice when selling your house.

Capital Gains rules are changing!

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Capital Gains rules are changing!

If you are a property investor or “accidental” landlord this is the blog for you. From the 6th of April 2020 the changes to Capital Gains tax rules will affect the sale of second homes and rental properties.

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Capital Gains Tax

Capital Gains Tax is paid at the following rates:

  • 18% for the basic rate taxpayer
  • 28% for the higher rate taxpayer

The current rule means that if you sell your property in the tax year, you will pay your Capital Gains Tax in the January after it is declared on your tax return. The new rule means that you need to declare the sale to HMRC and pay the Capital Gain within 30 days of the sale. This will need to be carefully planned by unsuspecting landlords.

Get your house in order

No doubt, there will be penalties from HMRC with those who do not comply. We are keeping our fingers crossed that letting agents have informed their Landlords of these new changes.
If you are a property investor and are in the position where you have not declared your rental income, please take a look at our recent blog – “Have you received HMRC’s Love Letter?”

PPR relief

Other changes include PPR (Principle Private Residence) Relief. This is the relief that enables taxpayers to sell their homes without having to pay Capital Gains Tax. If you buy and move into a second home, the final period of exemption for PPR relief is going to be reduced from 18 months to 9 months.
This applies to Landlords that let privately. However, with the new rules starting in April and the restriction on mortgage interest, trading through a Limited Company could be the answer for property investors for the following reasons:

  • 19% Corporation Tax if you sell the property, rather than 28%.
  • Full tax relief on the interest of the loan

Pros & Cons

As with most things there are pros & cons. We can help you make informed decisions on how you want to invest and join the exciting world of being a Landlord. Despite HMRC doing their best to penalise Landlords, with the correct set up and letting partners, renting property can be very rewarding.

House with a heart

Have you received HMRC’s ‘love letter’?

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Have you received HMRC’s ‘love letter’?

Have you declared your rental income? 

Lately we have seen an increase in HMRC asking people if they have received rental income. This comes in the form of a ‘love letter’ from HMRC and results in more and more people having to declare their rental income.

Connect 

The reason for receiving this ‘love letter’ is HMRC’s computer system “connect”. Connect draws data from all departments and connects you to every government system. It also looks at our digital footprint, snooping on our social medias, Ebay accounts and even Airbnb bookings. Using Artificial Intelligence (AI) the computer will asses our profiles and see if we could afford rental properties by cross referencing with your declared income on your HMRC tax account.

Social boxes coming from computer

‘Love Letters’ 

Red envelope and hearts

The ‘love letters’ we refer to are a direct result of HMRC’s Connect talking to its mates at the Land Registry. From this data they form a list of people that have sold property. If it is not listed as your main residence HMRC will put two and two together and ask if you have sold a second home and/or rental property. This will then be subject to capital gains tax and more!

Have you declared? 

If the sold property was used as a rental property, HMRC will then look to see if you have declared the rental income. In a lot of cases this has not been done and can go back many years. In a recent case of ours, we had to declare 10 years of rental income for a Husband and Wife.

‘My Mate Down The Pub’ 

Getting tax advice down the pub is not always a good idea. In a few cases, taxpayers have been under the impression that because the mortgage payments covered the rental income they didn’t have to declare the rental income. In reality only the interest is deductible. For higher earners being able to offset the basic rate relief is being phased out, turning rental income into profit and therefore tax payable.

Beeng moved into her partner’s flat several years ago, and decided to rent out her own property rather than sell it. Being didn’t think she was making a profit which needed to be taxed, because the rental income just covered the mortgage payments.
When working out her rental profit. Being needs to be aware that the only allowable expense for her mortgage is the interest amount of her mortgage repayment.
The interest amount of mortgage payments is restricted to the basic rate of income tax, irrespective of which income tax rate Being normally pays for other income she may have

HMRC

Take a look at HMRC’s website for more examples.

Our Advice 

If you have a rental property and need a ‘health check’ we would be happy to discuss and give you the options to declare the income and profit that you have been missing off of your tax returns. Declaring the error before the ‘love letter’ arrives will help your negotiations with HMRC and reduce any high penalties. 

Laptop on the grass

How can your business become Eco-friendly?

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How to make your business more eco-Friendly.

Since the industrial revolution both carbon levels and global temperatures have increased dramatically. The carbon pollution stays in our atmosphere and consequently traps the heat from the sun. This can cause extreme weather such as intense flooding or droughts. 97% of climate scientists agree that man-made pollution is warming our climate. In May 2019 the UK declared a Climate Emergency with many local areas stating they want to become carbon- neutral by 2030. To do this we need to work together, making a few small changes to our businesses.

Reusable Plastic Bottles

Plastic convenience products have made a huge contribution towards climate change. However the sales of bottled water are still on the rise. Look around your office, are your employees drinking bottled water now? Plastic bottles take hundreds of years to decompose if they make their way to landfills. One of the simplest ways to make a difference is to get rid of the disposables and purchase a reusable water bottle for your team. You will spot in our 1 Accounts office that each of the team have pink bottles from Hyd8 m8.

Plastic Bottles

Reduce Paper Waste

Paper being thrown in the bin

Technology has come on leaps and bounds in the last 10 years. Whilst some businesses are embracing how technology can help, others are stuck still using paper processes. Moving to the cloud can not only help the environment but will help streamline your business processes too. Consumers are becoming increasingly aware of the environmental impact of human activity causing businesses with paper processes to be less efficient and under scrutiny from its customers.

Leave the car at home

Road transport contributes 22% of total UK emissions of CO2. Only 6% of the UK population are walking to work and only 3% are cycling. Walking & cycling can have great health benefits and can help reduce the carbon emissions that are caused by commuting to work. From the 1 Accounts team, Jade, Katie, Kerry & Paul all walk/wheel to the office. For some people walking or cycling to work will not be possible however encouragement to those who can cannot hurt. For those meetings where you have to drive a long distance or even fly, consider using a video call using software such as Skype or Zoom. You can also bring in a work from home policy, allowing you & your employees to work from home even if only on a part time basis. This will reduce the energy used in your office spaces each day both saving money and cutting your businesses carbon footprint.

Man riding a bike

Office Space

Small changes such as changing to LED Lightbulbs can conserve energy reducing your electricity bills and will help protect the environment. You can also improve the air quality of your office by investing in office plants. Plants will help to clean the air and specific plants such as peace lilies, rubber plants and snake plants can help to remove contaminants too.

Power Off

Many businesses unnecessarily waste energy by not turning off their computers or appliances. To help you both save money and conserve energy make it compulsory for your employees to turn off their computers. Then identify any electronics in your office that stay on overnight, such as the printer and assign someone to shut these off at the end of the day.

Power Button

Reduce, Reuse and Recycle

Recycle sign

The three rules of protecting the environment are reduce, reuse and recycle. Set up a recycling bin for your employees. This will help avoid any recycling going into the waste bin due to an absence of recycling bin in the office.

Making your business eco-friendly does not have to be a big chore, by just making a few small changes you can really make a difference.

Watch this space for our next blog on how your business being eco-friendly can help your business:

  • Save money
  • Attract customers
  • Utilise tax incentives
  • Increase employee retention
  • Build a good brand reputation and increase publicity
  • Keep up with competition
  • Expand revenue opportunities.

2019 piggy bank

What happened in 2019?

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2019

2019 was another great year for 1 Accounts Online. We have streamlined our processes, brought in more team members and continue to provide a great service to our clients. With new advancements in technology such as open banking and MTD it is an exciting time to be a part of a rapid changing industry.

Automation, Automation, Automation

ClickWe encourage all our clients to use technology and automation to help streamline their business. We have continued to increase our use of automation using our workflow system Karbon. The team used to spend a few hours (at least) chasing client information. With our new automated system they no longer need to do this, as the emails automatically send requesting the required information for tax returns, quarterly reviews and accounts. There have of course been a couple of hiccups along the way, but we have saved the team time so they can focus on helping our client’s businesses grow.

MTD

One of the big changes in 2019 was MTD. HMRC decided that VAT submissions will have to be submitted through online software. Luckily for us, all our clients were using Xero or Sage Business Cloud so we had the software down. Jade then signed each of our clients up for MTD at no additional cost to the client. After HMRC’s rocky start, MTD is now underway and we look forward to seeing all taxes made digital.

New Clients

We have had an influx of new and exciting clients from web design to construction. We love adding more clients to the 1 Accounts family and look forward to helping them grow. We have enjoyed helping our existing customers thrive, our passion is to help business grow and we have seen wonderful changes in many of our clients.

New Services

In 2019 we started to develop new services for our clients. These are, The Business Coaching Service and Social Media. Watch this space as both services will be up on our website soon! If you can’t wait, email jade@1accounts.co.uk for more information.

New Team Members

2019 we brought 3 new members to the team. Katie started in the middle of the year for 2 days a week to help Jade with the sales side of 1 Accounts. Although they are sisters, they work well together and have developed a new sales process for the new year. Katie has also made great progression with her walking, and now walks the length of the office with a frame. We then had Fran start to help Jade for 3 days a week. Fran is also a pet photographer and loves to be creative and take pictures. In the last week of December we hired a new Bookkeeper Katy who will start with us this month. We are very excited to welcome her to our team and look forward to watching our team grow even more in the new year..

An inbox showing 6 emails

Instant Response Time

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INSTANT RESPONSE TIME

Growth in technology has lead to the need for instant gratification. With everything available at the click of a button our patience is dwindling. As a result of this emails can be hard to manage as people often expect an instant response.

The development in technology has been astounding, just 20 years ago iPhones didn’t exist and Spotify was just an idea. Air BnB and Uber were not even considered as possible. Technology has made our lives easier, but also for businesses it has made expectations higher. This is especially true for responding to emails. Here are our top tips for email management:

Instant responses

Instant responses are an unrealistic expectation. You are not a robot. Setting those expectations can be difficult, after all you want to keep your clients happy. Work emails on your phone can then stretch this expectation to be 24/7 rather than just in work time. Think of the effects this may have on yourself and your team. Put yourself first, emails can wait until the morning.

Allocate Time

Allocate time for your emails. At 1 Accounts we get a huge volume of emails with Paul and Jade opening their inbox in the morning to occasionally near 100 emails. These can be overwhelming at times especially when you have planned your day to complete other work. That is why we now allocate specific time to deal with them. We have an hour in the morning, 30mins after lunch and then an hour at the end of the day. Emails then get shut down for the time in-between allowing the team to focus.

Focus

Email notifications can be a huge distraction. To allow for ‘deep work’ these distractions need to be turned off. This means, turning off the push notifications on you phone and computer. This will allow you to focus on the job in hand, probably resulting in a better job and quicker result. You have allocated time for your emails so you won’t miss anything important and your clients will still be happy.

Sort

Sorting your emails is important. We use Karbon as our workflow system, that really helps us with our email management. To sort we scan through the inbox to see if there is any ‘junk’ that can be deleted straight away. This will clear more than you think and make the inbox less overwhelming. We then go through and answer any emails that we know will only take 1-5mins or that you can delegate. If there is an email regarding work that you know a team member is working on, pass it on, you don’t need to deal with it. Anything that will take longer than 1-5mins that you have to deal with gets scheduled into ‘deep work’ as it will require time and focus. Using this method will give your emails structure and efficiency.

So after reading this blog, turn off your push notifications, allocate time for your emails and allow time for ‘deep work’ and focus this should result in a happier team and a happier you.

Outside of a flower shop

Supporting Local Independent Businesses

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Supporting Local Independent Businesses

1 Accounts Haverhill is based on the top of the high street in Haverhill providing a service to both local and non-local businesses. Where we can we will support Haverhill businesses and we encourage our client to do the same.

The Economy

Not many people realise that shopping locally is great for the local economy. Research shows that £10 spent with a local independent shop results in up to £50 going into the local economy. This is due to local business owners putting the money back into the economy by them shopping, using and spending time and money in other local businesses. 1 Accounts use local Haverhill Bistro Nine Jars to host their company meals therefore putting money back into the Haverhill high street.

More Job Opportunities

Small local businesses are the largest employer nationally. Local employers are more likely to pay a higher than average wage than their commercial chain counterparts. Helping to grow the number of jobs in your area creates a healthy economy for the community. 1 Accounts Haverhill currently employ six members of staff. Four of the employees are Haverhill based and walk to work.

People

The best thing about using local businesses is that they are run by people; not by boards, stockholders or computers. This often mean a much better customer experience. For example; 1 Accounts Haverhill use Kiiwii Clothing and Promotions for anything that needs branding. When ordering their branded notebooks they could pop into their offices on the outskirts of Haverhill and discuss exactly what they wanted with Keith & Amanda. Ordering online, you do not get this level of service or have the trust that you will get exactly what you want.

Innovation

Small businesses can make changes and be innovative without having to jump through hoops. 1 Accounts were at the forefront of online accounting and now other accountancy firms are following suit. Haverhill has a wealth of small business that are leading the way for innovation.

In short, why would you not use a local business? 1 Accounts Haverhill & Cambridge will continue to use local businesses to enhance their local economy.

Wine & Cheese night

1 Accounts Wine & Cheese Night

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Wine & Cheese Night

In aid of the St Nicholas Hospice Accumulator Challenge 1 Accounts Online will be holding a Wine & Cheese Tasting evening at Baythorne Hall near Haverhill …. And your all invited. The event will take place on the 9th of August at 7pm.

George from Baythorne Wines will be talking us through his favourite wines from his wine shop. Baythorne Wines was established in the former granary barn at Baythorne Hall in 2014. The shop offers over 400 wines from around the world and George’s knowledge is second to none. We can’t wait to try a selection of the wines. The cheese is from Ben & Ella’s Farm Shop.  These cheeses will pair perfectly with the wine. You will be wanting to come back and create your own wine and cheese night at home!

Jade will be singing at the event to start the night. She will be singing some of her favourite Jazz tunes to get you in the mood for the wine and cheese.

Hello May

1 Accounts May Update

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MAY UPDATE

May disappeared before our eyes, with tax returns, accounts and quarterly reviews in full swing. The sunshine has been fleeting but our smiles have stayed all month long. Here is what we got up to this month:

Clever Grace

Grace got a whopping 86% on her exam on Management accounting and budgeting. She is studying hard for her level 4 AAT and will be fully qualified in no time. Her next exam is on Management accounting: Decision and control.

Outsourcing our IT

When there is a problem with IT it can be detrimental, especially to 1 Accounts as we need our computers in order to do our work. It can take hours for us to figure out how to fix a problem and so when starting 1 Accounts Paul decided to outsource our IT and take the hassle away. We have just changed providers to Platform 365. We can’t wait for them to start!

Jade Singing

Jade had her busiest month ever with her singing. She sung love songs, jazz songs, pop songs & rock & roll songs. She also had her first gig in her duo The Blue Jays at Nine Jars. Be sure to keep an eye on her Facebook Page for more events!

https://www.facebook.com/jadedonnosinger/

Mind mapping for marketing

Marketing For Business

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Marketing For Business

Marketing hasn’t changed. But the approach towards it has become far more relational. You used to explain the services you offer and told people to contact you. Now its about sharing helpful information. Advice and ideas. Tips and hints. Great stories.

Your prospective client consumes this content over a period of time and when they are ready they come to your because you’re top of mind. Or when they’re referred to you they come to your content, consume it quickly and make a faster quicker decision.

It’s called content marketing. There are a variety of formats (video, blog, social post, events) and at it’s core is your client. Its all about them: who they are, what they struggle with,, how you approach it.

There’s a 12 step process to generate the very best content (bringing you the very best clients), and It goes like this:

  1. Niche
  2. Issues
  3. Content
  4. Brand
  5. Design
  6. Website
  7. Email
  8. Follow up
  9. Blog
  10. Events
  11. Campaigns
  12. Social Media

Each one builds on the one before. If you tried to start at the end, with social media, you’d have to back up to create a campaign, you need to know your audience, their issues, the content you’re sharing. You need to be clear about your brand and how you design things and have a website and email platform …. And it all comes together!

(Written by Karen Reyburn)

Toy house with a key

POSSIBLE CHANGES TO CGT PRIVATE RESIDENCE RELIEF

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POSSIBLE CHANGES TO CGT PRIVATE RESIDENCE RELIEF

The government is currently consulting on important changes to private residence relief that are likely to be introduced from 6 April 2020.

The two possible changes, announced in the Autumn 2018 Budget are:

  • Firstly to limit to just 9 months the period prior to disposal that counts as a period of deemed occupation.
  • The second is to limit “letting relief” to periods where the taxpayer is in shared occupation with the tenant.

Final period exemption to be reduced

The final period exemption was for many years three years and was always intended cover situations where the taxpayer was “bridging” and waiting to sell their previous residence. However, 36 months was felt to be too generous and was allegedly being abused by a strategy known as “second home flipping”. As a result the final period relief was restricted to the current 18 month period of deemed occupation a couple of years ago. The latest proposal is to restrict still further to 9 months although it will remain at 36 months for those with a disability, and those in or moving into care.

Possible Lettings Relief Changes

Lettings relief currently provides a further exemption for capital gains of up to £40,000 per property owner. The additional relief was introduced in 1980 to ensure people could let out spare rooms within their property on a casual basis without losing the benefit of PRR, for example where there are a number of lodgers sharing the property with the owner.

In practice lettings relief extends much further than the original policy intention and also benefits those who let out a whole dwelling that has at some stage been their main residence. It is those situations that the government appear to be attacking under the proposed changes.

Note that those who are renting their property temporarily whilst working elsewhere in the UK or working abroad are unlikely to be affected by this change as there are alternative reliefs available under those circumstances.