Tag: ltd company

capital gains tax planning

Capital Gains Tax Planning: Tips for Reducing Your Tax Liability

Posted on | by Jade Donno

Capital Gains Tax Planning: Tips for Reducing Your Tax Liability

Capital Gains Tax (CGT) is a tax on the profit when you sell (or ‘dispose of’) an asset that has increased in value. It’s the gain you make that’s taxed, not the amount of money you receive. Navigating CGT can be daunting, but with careful planning, you can minimize your liability. Here are some tips to help you effectively manage CGT in the UK:

1. Use Your Annual Exemption

Each tax year, individuals have an annual CGT exemption (£6,000 for the 2023/24 tax year & £3,000 for  24/25  onwards). Ensure you utilise this allowance by timing the disposal of assets to maximise your exemption.

2. Offset Losses

Offset any capital losses against your gains to reduce the taxable amount. Keep records of past losses, as they can be carried forward to future years.

3. Utilise Tax-Advantaged Accounts

Investing through ISAs (Individual Savings Accounts) or pensions can shield your gains from CGT. Gains made within these accounts are exempt from CGT.

4. Consider the Timing of Disposal

Strategically timing the sale of assets can help spread gains across different tax years, ensuring you make full use of the annual exemption each year.

5. Gifting Assets to Spouse

Transferring assets to a spouse or civil partner before selling them can be tax-efficient, as transfers between spouses are exempt from CGT and both partners can utilise their individual exemptions.

6. Claim Entrepreneur’s Relief

If you’re selling a business or shares in a trading company, you may qualify for Business Asset Disposal Relief (formerly Entrepreneur’s Relief), which reduces the CGT rate to 10% on qualifying gains.

7. Keep Comprehensive Records

Maintain detailed records of all asset acquisitions, improvements, and disposals. Accurate documentation will ensure you claim all allowable deductions and exemptions.

8. Seek Professional Advice

Tax rules are complex and subject to change. Consulting with a tax advisor can help you navigate the intricacies of CGT and implement the most effective strategies for your specific situation.

By incorporating these tips into your tax planning, you can significantly reduce your Capital Gains Tax liability and optimise your financial outcomes. For personalised advice tailored to your circumstances, contact us at 1 Accounts Online. We’re here to help you manage your finances with ease and expertise.

Visit our Knowledge Centre for more insights and guidance.

hands voting

Election 2024: What Business Owners Need to Know

Posted on | by Jade Donno

Election 2024: What Business Owners Need to Know

As the 2024 election approaches, business owners across the UK are keen to understand how potential changes in government policies might impact their operations. The outcome of this election could bring about significant shifts in economic, tax, and regulatory environments. To help you stay informed and prepared, we’ve outlined key considerations and potential impacts for business owners.

Economic Policies

Taxation Changes

One of the most significant areas where elections can impact businesses is taxation. Different political parties often have varying approaches to corporate taxes, VAT, and other business-related levies. It’s essential to stay informed about each party’s tax proposals:

  • Corporate Tax Rates: Changes in corporate tax rates can directly affect your profitability. Watch for proposed increases or decreases in these rates and consider their implications for your financial planning.
  • VAT Adjustments: Shifts in VAT rates can influence your pricing strategy and cash flow. Keep an eye on proposed changes and plan accordingly.
  • Business Reliefs and Incentives: Look for any new reliefs or incentives aimed at small and medium-sized enterprises (SMEs). These can provide valuable opportunities for growth and investment.

Employment and Labour Policies

Labour policies, including those related to the minimum wage, worker rights, and employment regulations, can significantly impact your business operations:

  • Minimum Wage Adjustments: Increases in the minimum wage can raise your labour costs. It’s crucial to factor these potential changes into your budgeting and staffing plans.
  • Worker Rights: Enhanced worker rights and protections may require adjustments to your HR policies and practices. Ensure you understand any new regulations to remain compliant.
  • Employment Contracts and Benefits: Changes in laws regarding employment contracts and benefits can affect your employee relations and retention strategies.

Regulatory Environment

The regulatory landscape is another area that can undergo significant changes following an election. Here are some key areas to monitor:

  • Health and Safety Regulations: New or revised health and safety regulations can impact your operational procedures and compliance requirements.
  • Environmental Regulations: With increasing focus on sustainability, expect potential changes in environmental regulations that could affect your business practices and reporting obligations.
  • Industry-Specific Regulations: If you operate in a highly regulated industry, such as finance or healthcare, stay informed about any sector-specific regulatory changes that could impact your business.

Trade and International Relations

The UK’s trade policies and international relations can influence your supply chain, export opportunities, and overall market stability:

  • Trade Agreements: New trade agreements or changes to existing ones can open up new markets or impose new barriers. Keep an eye on proposed trade policies and consider how they might affect your business.
  • Import and Export Regulations: Adjustments to import and export regulations can impact your supply chain logistics and costs. Stay informed to mitigate potential disruptions.
  • International Relations: Geopolitical shifts and changes in international relations can influence market conditions and business confidence. Monitor these developments to adapt your strategies accordingly.

Financial Markets and Investment Climate

The election outcome can also influence the broader financial markets and investment climate:

  • Market Stability: Political uncertainty can lead to market volatility. Be prepared for potential fluctuations in share prices, interest rates, and currency exchange rates.
  • Investment Opportunities: Changes in government policies can create new investment opportunities or risks. Stay informed about potential shifts in the investment landscape to make informed decisions.
  • Access to Finance: Monitor any proposed changes to government-backed finance schemes and support for businesses. These can provide crucial funding opportunities for growth and expansion.

Preparing for the Election Outcome

While it’s impossible to predict the exact outcome of the 2024 election, proactive planning can help mitigate risks and position your business for success:

  1. Stay Informed: Regularly update yourself on the latest news and developments related to the election. Follow reliable sources and consider joining business networks or associations that provide insights and analysis.
  2. Scenario Planning: Develop contingency plans for different election outcomes. Consider how changes in policies might impact your business and identify strategies to address potential challenges.
  3. Engage with Stakeholders: Communicate with your stakeholders, including employees, customers, and suppliers, to understand their concerns and expectations. Keeping an open line of communication can help build resilience and trust.
  4. Seek Professional Advice: Consult with financial advisors, accountants, and legal experts to navigate potential changes in the regulatory and economic environment. Professional guidance can help you make informed decisions and stay compliant.

Conclusion

The 2024 election presents both opportunities and challenges for business owners. By staying informed and prepared, you can navigate potential changes and position your business for continued success. At 1 Accounts, we’re committed to helping you understand and adapt to the evolving business landscape. If you have any questions or need assistance with your financial planning, please don’t hesitate to contact us.

R&D

What are R&D tax credits?

Posted on | by Jade Donno

What are R&D tax credits? 

In today’s competitive market, businesses constantly strive to innovate and stay ahead of the curve. One powerful incentive that can help companies in is the Research and Development (R&D) tax credit. This blog aims to break down what R&D tax credits are, how they work, and why they can be a game-changer for your business.

What Are R&D Tax Credits?

R&D tax credits are government incentives designed to encourage companies to invest in research and development. These credits are available in many countries and are intended to reward businesses that work on innovative projects, develop new products, or improve existing processes and technologies. By reducing the tax liability, tax credits make it financially easier for companies to invest in innovation.

How Do They Work?

To benefit, a company must engage in qualifying research activities. These activities generally include:

  • Developing New Products: Creating new products or improving existing ones.
  • Technological Advances: Making significant advancements in technology.
  • Process Improvements: Enhancing manufacturing processes, software development, or other operational processes.

For the full list please check out the government website – https://www.gov.uk/government/publications/guidelines-on-the-meaning-of-research-and-development-for-tax-purposes/meaning-of-research-and-development-for-tax-purposes-guidelines

Key Benefits of R&D Tax Credits

  1. Financial Savings: R&D can significantly reduce your tax bill, freeing up funds that can be reinvested into your business.
  2. Encouragement to Innovate: These credits incentivise companies to pursue innovation without the fear of financial strain.
  3. Competitive Edge: Investing in R&D can lead to new products or processes that give your company a competitive advantage.
  4. Increased Investment: The financial relief provided by these credits can encourage further investment in research and development.

Who Can Qualify?

Many businesses across various industries can qualify for R&D. These industries include, but are not limited to:

  • Manufacturing
  • Technology
  • Pharmaceuticals
  • Engineering
  • Agriculture

How to Claim:

Claiming R&D involves a few essential steps:

  1. Identify Qualifying Activities: Determine which of your R&D activities qualify for the tax credit.
  2. Document Your Research: Maintain thorough records of your R&D projects, including the costs associated with each activity.
  3. Calculate the Credit: Calculate the amount of tax credit you are eligible for based on your qualifying expenses.
  4. Submit Your Claim: File your claim with the appropriate tax authorities, providing all necessary documentation and calculations.

Common Misconceptions:

  1. Only Large Companies Qualify: Small and medium-sized businesses can also benefit significantly from R&D tax credits.
  2. R&D Means Lab Work: R&D activities are not limited to lab-based research. They can include software development, engineering improvements, and more.
  3. Too Complicated to Claim: While the process can be detailed, there are many resources and advisors available to help you navigate the claim process.

Conclusion

R&D tax credits are a valuable resource for companies aiming to innovate and grow. By understanding and leveraging these credits, businesses can reduce their tax liabilities, reinvest in their development efforts, and maintain a competitive edge in their industry. If your company is involved in any form of research and development, exploring R&D tax credits could provide substantial financial benefits.

For more detailed information and guidance on claiming R&D tax credits, consider consulting with a tax professional who specialises in this area. Investing time in understanding and applying for these credits can significantly impact your business’s financial health and innovative potential.

confused person

Top 10 “I didn’t know that” questions answered

Posted on | by Jade Donno | Leave a Comment on Top 10 “I didn’t know that” questions answered

I didn’t know that?

This is a phrase we hear a lot, especially when someone sets up a limited company and especially in January when personal tax returns are due.

Here are our top 10 I didn’t know that questions

1 . I didn’t know that I needed a separate bank account?

  Yes, a limited company is its own entity and funds held in a personal account will be deemed personal income and could attract tax. Therefor you will need to set up a business bank account for your limited company.

2. I didn’t know I had to register to pay myself?

Yes you need to register with HMRC for a PAYE reference and deduct tax and NI on your earnings.  Note single director companies do not get the £5,000 employers NIC relief.

3. I didn’t know I paid tax on dividends?

Yes, you pay tax on dividends and these are declared on your personal tax return.  

4. I didn’t know you had to make a profit to declare dividends?

Yes, dividends are a distribution of profits and not an expense.  You need to prepare a profit and loss account, work our corporation tax payable and then you can declare a dividend.

5. I didn’t know I needed paperwork for the dividend?

Yes, you need a board minute and dividend voucher prepared on the day that you declared the dividend.  Backdating to ‘FIT’ your accounts is illegal.

6. I didn’t know I had to keep accounting records? 

Yes, HMRC require you to keep accounting records and the Companies Act.  We recommend Xero as an accounting software provider.  Giving over a years bank statements and records to prepare is expensive and you will have no idea of dividends you can vote if any.

7. I didn’t know I paid tax on monies taken from the company? 

Yes, if you have borrowed from your company you will pay tax on your Corporation Tax Return.  This is a holding tax that will be repaid once you are back in funds with the company.

8. I didn’t know my company had to register for VAT? 

Yes, if you exceed £85,000 in a rolling 12 months you must register for VAT and in some cases it is better if you do register for VAT.

9. I didn’t know I couldn’t run my car through the business?  

You can run the car through the business BUT it will be classed as a benefit in kind and you will pay tax on the benefit.  Some cars are much better through a Limited company than others.  Electric cars are a great benefit.

10. I didn’t know it was so complicated? 

This is where a good accountant will help you manage your limited company so that you comply with the companies act, HMRC and help move your business forwards.

 

Take a look at this video: