Tag: accounting

hands with a car

Is the Jaguar i-Pace a good company car?

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Is the Jaguar i-pace a good company car?

Here at 1 Accounts in Haverhill and Cambridge we are often asked can I buy a car within the company?  The answer is of course yes. However when benefit in kind tax and class 1A National Insurance is explained our clients most likely either buy the car privately or buy a Van.

Things may be about to change with Electric Cars.  One of our clients has just purchased a Jaguar i-Pace and Paul Donno our Director also has his eye on one for next year, although his wife Jenni still needs a little convincing!

There are of course other Electric cars on the market and the bigger luxury brands will be competing hard to get the company car market, with Audi and BMW starting to offer full electric.

Our Favourite 

The i-pace is our favourite at the moment and it is 2019 World Car of the year. Take a look

Our Calculations 

We are expecting a high increase in electric vehicles next year due to the new benefit in kind rates which are very attractive.

Our calculations are based on the advertised basic price of £64,495.

The rate for the tax year 6 April 2019 to 2020 is 16% and this is a Benefit in kind of £10,319.  If you are a basic rate taxpayer the tax payable is £2,064 and higher rate tax payer (40%) £4,128.  Your company will also pay 13.8% in Class 1A National Insurance of £8,900.

However the Benefit in Kind Charge for the tax year 6 April 2020 to 5 April 2021 is just 2% and this is a benefit in kind charge of £1,290.  The tax charge is £258 Basic rate and £516 Higher Rate with a class 1A payment of £178.

As you can see the saving is a huge £12,334 which includes the Class1A NI.

It is also worth considering the Work Place Charging Scheme allowing you to provide charging points for your workforce. Click here to find out more.

Capital Allowance 

The other real benefit is Capital Allowance. Electric cars qualify for First Year allowances which means that the entire purchase price is allowable against Corporation Tax. If you buy the vehicle after 1 April 2020 this rate is 17%.  Based on the Jaguar i-pace that is a Corporation Tax saving of £2,193. Click here to read more. 

Our Recommendation 

We recommend the electric car for your company vehicle from 6 April 2020, make sure that if fits your personal and business needs.  We would expect demand on the popular models to be high and waiting lists long therefore you may want to start looking very soon.

Be careful of any caveat relating to Brexit as we understand that some manufacturers are asking you to sign to accept an increase in duty especially if we have no deal.

We expect to see many electric cars around Haverhill next year. Paul is hopeful on persuading Jenni to have one (on the company of course).

Cloud Accounting Benefits

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Cloud Accounting Benefits

If you want your business to work smarter and faster, cloud accounting software is a wise investment. Working in the cloud will give you a better overview of your finances, and improve collaboration with your team.

Accounting software shouldn’t be a chore to use!

Small business accounting software that’s not available via the cloud can be tedious. Traditionally, it can suck up far too much of your business’ time and effort. This doesn’t add value, and takes the fun out of being in business. Cloud software can save your company time and money.

So what is this thing called the cloud?

Think about when you use internet banking. Every time you access this data, you’re using the cloud. The cloud is a platform to make data and software accessible online anytime, anywhere, from any device. Your hard drive is no longer the central hub.

Problems with traditional accounting software

  • The data in the system isn’t up to date and neither is the software.
  • It only works on one computer and data bounces from place to place. For example, on a USB drive. This is not secure or reliable.
  • Only one person has user access. Key people can’t access financial and customer details.
  • It’s costly and complicated to keep backups (if done at all).
  • It’s expensive, difficult and time consuming to upgrade the software.
  • Customer support is expensive and slow.

Why the cloud and accounting software are the perfect match

You can use cloud-based software from any device with an internet connection. Online accounting means small business owners stay connected to their data and their accountants. The software can integrate with a whole ecosystem of add-ons. It’s scalable, cost effective and easy to use.

In the cloud, there’s no need to install and run applications over a desktop computer. Instead, you pay for the software by monthly subscription.

Cloud security is world class

As a small business owner, you might be concerned about a cloud service provider storing your data. But the cloud is one of the most secure ways to store information. For example, using cloud software, if your laptop is stolen, no one can access your data unless they have a login to the online account. With cloud software, this is where the data lives – as opposed to on your hard drive.

In the event of a natural disaster or fire, being in the cloud means business productivity doesn’t need to be affected because there’s no downtime. All of your information is safely and securely stored off site. As long as you have access to any computer or mobile device connected to the internet, you’re back up and running.

In addition to this, if you invite users to view your data, you can control the level of access. This is much more secure than the old-fashioned way of emailing your files or sending out a USB stick with your data on it.

Cloud-based software companies ensure that the security and privacy of data about you and your organisation is always airtight. If you use online banking, then you’re already primed to use cloud accounting.

Five ways cloud software benefits your business

  1. You have a clear overview of your current financial position, in real-time.
  2. Multi-user access makes it easy to collaborate online with your team

    and advisors.

  3. Automatic updates mean you can spend more time doing what you love.
  4. Everything is run online, so there’s nothing to install and everything is backed up automatically. Updates are free and instantly available.
  5. Upfront business costs are reduced – version upgrades, maintenance, system administration costs and server failures are no longer issues. Instead, they are managed by the cloud service provider.

Work smarter with accessible data in the cloud

The beauty of this software is the flexibility it gives you to run your business from work, home, or on the go. You can be confident that you have an up-to-date picture of how your business is doing, no matter where you are.

Software updates can be developed and delivered faster and more easily in the cloud. This means you don’t need to worry about installing the latest version and you’ll get access to new features instantly. With cloud accounting software, you have the option to run your business remotely, from anywhere in the world. And when data is fluid and accessible, the possibilities are endless.

To read Xero’s original small business guide please follow this link: Xero’s Blog

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.

Toy house and hands

“RENT A ROOM” RELIEF TO CONTINUE FOR AIR BNB LANDLORDS

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“RENT A ROOM” RELIEF TO CONTINUE FOR AIR BNB LANDLORDS

Last year HMRC carried out a review of rent a room relief and it was proposed that the availability of this generous relief would be restricted to situations where the taxpayer was resident for at least part of the time when the “lodger” was paying rent. The scheme currently exempts from tax gross rents up to £7,500 where rooms within the taxpayers’ main residence are rented out.

HMRC were concerned that the relief was being “abused” by letting out the entire property using websites such as Airbnb and living elsewhere temporarily whilst the tenants were in the property. An example would be renting out a house in south London during Wimbledon fortnight and potentially receiving up to £7,500 tax free.

Note that the Autumn Budget announced that the proposed restriction was not now being introduced.

Family eating a picnic in a clearing in the woods

Extracting Profit From Your Family Company

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EXTRACTING PROFIT FROM YOUR FAMILY COMPANY

The start of the new tax year means that shareholder/ directors may want to review the salary and dividend mix for 2019/20. The £3,000 employment allowance continues to be available to set against the employers national insurance contribution (NIC) liability which means that where the company has not used this allowance it may be set against the employers NIC on directors’ salaries.

Thus, where the only employees are husband and wife there would generally be no PAYE or employers NIC on a salary up to the £12,500 personal allowance.

There would however still be employees NIC at 12% on the excess over £8,632 (£166 per week) which would be £464 on a £12,500 salary, leaving £12,036 net.

Taxation of Dividend Payments in 2019/20

Traditional advice would then be to extract any additional profits from the company in the form of dividends. Where dividends fall within the basic rate band (now £37,500) the rate continues to be 7.5% after the £2,000 dividend allowance has been used. Thus where husband and wife are 50:50 shareholders they would each pay £2,663 tax on dividends of £37,500 assuming they have no income other than a £12,500 salary, leaving £34,837 net of tax.

So a combination of £12,500 salary and £37,500 in dividends would result in £46,873 (93.7%) net of income tax and NICs.

Ensure dividend payments are legal

The Companies Act requires that companies may only pay dividends out of distributable profits. This means that in the absence of brought forward reserves the company would need to provide for 19% corporation tax in order to pay the dividends and thus there would need to be profits of £92,593 in order to pay dividends of £75,000 (after providing corporation tax of £17,593).

Overall the combination of salary and dividends suggested above would result in net of tax take home cash of £93,746 for the couple out of profits before salaries and corporation tax of £117,593 (20.3% overall tax). This still compares very favorably with the amount of tax and NIC payable if the couple were trading as a partnership.

Our Advice

Make sure that your SageOne or Xero is up to date so that we can assess your distributable reserves and complete your Dividend vouchers and board minutes.

Where we complete your payroll we will have changed your payroll to suit your business and maximise your tax reliefs.

 

Automation Cog

Automate, Automate, Automate

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Automate, Automate, Automate

The 21st century brings a new kind of technology that has not been around for past businesses. Online tools can help make business more streamlined, efficient and productive. 1 Accounts strive to adapt these new technologies to not only help our business but to help our clients too. With this blog I will talk you through how we have automated our processes to allow us extra time to help our clients.

Karbon

When we receive a new enquiry we start our process on Karbon. Karbon is a work flow program that helps our team work together and not miss any important deadlines. We assign an on boarding template to the enquiry. This includes pre-written emails that can be sent with just a click of a button. We have also used Jot Form to create secure forms for our clients to fill out with all the information we need. The links to these forms are included in our pre-written email. This leaves out any need for unnecessary work.

Practice Ignition

Once a prospect decides they would like to sign up with 1 Accounts, we then create a proposal in Practice Ignition. We love this piece of software. Our proposals are already set up, we just fill in any specific details and send to the client. Once signed Practice ignition automatically sets up the direct debit for our client.

Go Cardless

All our clients are on a monthly fee which is taken via direct debit in Go Cardless. This is set up through Practice Ignition and takes the monthly fee. Go Cardless means that we are no longer chasing payments and our ‘getting paid’ process is completely automated. Go Cardless will then generate an invoice into Xero automatically.

Xero

Once the direct debit has been taken Go Cardless prompts Xero to create an invoice to be emailed to the client. Our whole process is automated, eliminating the need for manual work.

We are working on ways to automate even more of our processes. Information requests for year end accounts and tax returns are now becoming automated so that we can receive information earlier to enable us to complete the work quicker. We are always looking for new ways to help automate our clients business’s. If you need help with this please contact jade@1accounts.co.uk and she will be sure to help.

happy new year typewriter

Happy New Year

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Happy New Year

The 6th of April marked the first day of the financial year. This brings a few changes to individuals and businesses.

The Personal Allowance 

The personal allowance (the amount you can earn before paying Income Tax) has increased from £11850 to £12500. This will lead to a small reduction in tax. For higher rate tax payers the allowance will increase from £46,350 to £50,000.

The National Minimum Wage

The national minimum wage has changed on the 1st of April 19.

  • For 25 years and older the minimum wage has changed from £7.83 to £8.21
  • For 21-24 years the minimum wage has changed from £7.38 to £7.70
  • For 18-20 years the minimum wage has changed from £5.90 to £6.15
  • For under 18 year the minimum wage has changed from £4.20 to £4.35
  • For an Apprentice the minimum wage has change from £3.70 to £3.90

Student Loans 

The earnings threshold has also increased for paying back students loans.

  • Plan 1 loans will rise from £18,330 to £18,935.
  • Plan 2 loans will rise from £25,000 to £25,725.

This will apply to all current and future student loans where employers make student loan deductions.

Auto-Enrolment 

The minimum amount for auto-enrolment has also increased. Employers now must contribute a minimum of 3% of the employees qualifying earnings (an increase of 1%). Employees must pay 5%. The total minimum contribution is now 8% (from 5%)

Preparation 

In preparation for the influx of personal tax returns we are preparing early this year. Our clients would have received an automatic email from Jade requesting information to complete their self assessment. This is not due to be submitted until January 2020, however we are aiming to have all tax returns completed by the end of the year!

Staff Only

Keeping up with the Employees!

Posted on | by Jade Donno

Keeping up with the Employees

Unlike the Kardashians it can be extremely hard to keep up with your employees hours, especially if your business is not office based. Here is our simple solution on how we can help you ‘keep up with the employees’.

The Problem: 

Many employees are paid by the hour and quite often employers have not invested in a clocking in system. This means employees are responsible for keeping their own paper timesheets. These are then given the the team member in charge of payroll to be inputted into the system. There are a number of things that could go wrong with this way of working:

  • The employee doesn’t meet the deadline
  • The hours are inputted incorrectly onto the system
  • The handwritten hours are hard to read and so takes extra time to decipher
  • The employee is away from the office and unable to bring in their payslip before the deadline.

All these things can create unnecessary nightmares for business. But it’s okay, we have a solution.

The Solution: 

These days most people own a smart phone. With Xero Payroll our clients have access to the Xero Me app.  With this app employees can fill out their timesheets on the go. This is then fired off to the office for approval. Once approved the hours are automatically put in the payroll ready for the next pay run. Employees can also view all their payslips and download them. It is a great tool and if you already have Xero Payroll, this app is free to use.

No errors, no delays and always on time!

Accumulator Challenge group shot

The 1 Accounts Accumulator Challenge

Posted on | by Jade Donno

The 1 Accounts Accumulator Challenge

This year we are thrilled to announce that we are the sponsor for St Nicholas Hospice’s Accumulator Challenge. We felt it fitting that on their 10th year anniversary we should be the sponsor as Paul won the first one raising £2600. This year we hope to get lots of business involved and make this the best year ever!

Who are St Nicholas Hospice? 

St Nicholas Hospice is a local charity providing help, advice and support to people in West Suffolk and Thetford in the final chapters of their life who are living with long-term and life threatening illnesses. Their services are not just for patients but for family members and friends too. They include anything from specialist medical care to bereavement support and practical help. To run the hospice they require £11,000 every single day. Any help to raise money to help is greatly appreciated.

What is the Accumulator Challenge? 

The Accumulator challenge is a great event for business to get involved in. On the 13th of June you will receive a crisp £50 note. From that £50 you need to generate as much profit as possible. You have until the end of September to raise as much money as you can. There will then be an awards ceremony in October to announce the winners.

What can I do to raise money? 

Here at 1 Accounts we want to help you with creating ideas to make the most money from your £50. Below are just a few ideas you could action:

  • Hold an auction
  • Hold a fundraising event
  • Complete a sporting challenge
  • Social activities

For 5 years Paul, Jenni, Jade and Katie were involved in the Challenge, they dressed up as clowns, busked, held a casino night and wine tastings. The video below shows all the fun they got up to!

What’s in it for you? 

We understand that as a business your time is precious however the Accumulator challenge can be beneficial for your business as well as the Hospice.

  • You will gain networking opportunities with people and other business.
  • It can build teamwork and moral within your staff.
  • You will gain PR/marketing opportunities from the Hospice and 1 Accounts Online
  • You will make memories for your business and have fun doing so.
You are not a bank

1 Accounts – You are not a bank

Posted on | by Jade Donno

You Are Not A Bank

As a small business, credit control can be a nightmare. Paul will tell you that when he first started running his traditional accountancy practice (Paul Donno & Co) he was pulling his hair out when he would do work, invoice the client and then not get paid. Unlike buying a product, paying for a service seems to have less urgency when it comes to paying. It used to take Paul on average just over 90 days for collection on 10 day accounts.

There is a group we belong to called the 2020 Group. One of the founders, a guy called Gordon Gilcrest spent some time with Paul to help his overcome this problem, he sat him down and said to him:

“Paul, you are not a bank. If people want a loan, they can go to the bank and they can pay interest on it. You are not a bank; you have credit terms, stick to the credit terms. If you give 14 days’ credit that gives them the right to pay within 14 days, not over days and pay you 50-60 days later”

This advice has stuck with Paul, and he re-evaluated his approach as a result. He spoke to the clients who were taking a long time to pay and advised them that they needed to change their ways. He also parted ways with a couple of companies.

When starting 1 Accounts Paul did not want these problems again. We set up Go cardless and have automatic direct debits taken every month. The direct debit is automatically set up when the proposal is signed. This saves time, money and chasing.

Here is our advice to you if you are struggling with credit control:

  • Look at your trading terms and ask yourself why you are offering credit, and if you do offer credit, want are your terms? Work out on average how quickly your customers are paying.
  • If you are lending money long term, that is for banks to do and not you!
  • Look at all types of money collection and do not put barriers in the way. Take credit cards, offer direct debit, provide alternative funding to customers
  • Remember ‘Turnover for vanity, profit for sanity but cash is reality’
  • It is no good tying up your money in stock that takes ages to turn over, measure stock turnover and don’t lock up your cash.
  • Don’t give extended credit, and if you do chase it hard, you have already paid for the goods sold or staff to provide services.
  • Without cash, you cannot make rational business decisions to move forwards.