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Accounting tips for Small Businesses

Bookkeeping and accounting can be an overwhelming task even for experienced business owners; however there are a couple of straightforward strategies that can keep your finances in working order. Here is a list of some of the most helpful accounting tips for your small business.

 

Keeping all your Records and Receipts in order

If you don’t keep your records and receipts you could miss out on valuable tax deductions on expenses or you could end up understating your income which could lead to potential fines and penalties.

A solution to help with this is to make use of one of the number of cloud accounting packages that allow you to track and submit your expenses on the go from your mobile or tablet. Another benefit of cloud accounting packages is that you can store all your receipts and bills online so there is no risk of losing them. Or you can still record your records on excel or use a desktop accounting package to help track your transactions. HMRC requires you to keep them for 6 years. Once all of all of your transactions are on a cloud accounting package they can be reconciled and categorized.

By keeping good records of your business you can ensure you get paid by all of your customers which is very important for small businesses with limited cash reserves.

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 Start early and keep on top of your records

If you start early and keep on top of your records you will save a lot of time and stress. As mentioned above, cloud accounting software can help with this but you have to keep updating your records in order to stay ahead. pexels-photo-374074 (1)

Forms and Deadlines

Most small businesses have at least two deadlines, One for filling out tax returns; the other for paying the associated tax bill. If your business turn over exceeds £85,000 your business will most likely have VAT returns to file as well. However the payment of liability can be set up as a direct debit straight from your business bank account.

Furthermore, if you have a limited company your company will have to file its annual accounts with companies’ house and HMRC. Should you miss any of these deadlines, Penalties can build up quickly. On top of that, if you are an employer you also have to file payroll RTI (Real time information) returns each time you pay your staff.

An accountant can help ensure you meet those deadlines and perhaps help your business to save tax and grow its turnover on profits.

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End of paper copy SA302 for mortgage applications

For those applying for mortgages, remember as from the 4th September 2017 HMRC will not be issuing a paper copy of SA302. In the past, we have experienced a lot of mortgage advisers refusing to accept the form SA302 provided by accountant (from commercial software’s), and some won’t even accept those printed from HMRC website, and majority of the time we have always been force to ring HMRC to obtain a copy for the client, to ensure we don’t end up upsetting our clients or even a chance of losing them when they are desperately trying to apply for mortgage.  Majority of the lenders now accepts the printed copy from commercial software or from HMRC overview. HMRC have a list of lenders who accept SA302 printed from online or commercial software click here to see the list.

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How to choose the right accountant

Choosing the right accountant is a very important decision to make for a small business. If chosen correctly you could save time and will help your business grow. A bad one could cost you money and you could miss out on things you should know. Here are some top tips on searching for the right accountant for your business:

 

  • Look for an accountant that demonstrates the skills and knowledge of supporting a small business

 

  • Take your time when researching for the right accountant. Perhaps speak with 3 or more accountants to find the best one for your business

 

  • Look for an accountant with relevant expertise. For example if your company uses cloud based software you’ll probably want someone who is confident with using cloud computing.

 

  • Ask friends or family who own small businesses if they would recommend their accountant. Keep in mind that if you have different type businesses their accountant might not suit your company.

 

  • Find one who is willing to use the same software as you. It will waste less time and prevent more errors in the long run.

 

Remember a good accountant will help you business to grow. You need someone you can trust and who has the necessary experience.

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Update on Quarterly Tax Returns

The government have now scrapped plans to introduce quarterly tax returns, which has potentially saved people who are self-employed hundreds of pounds a year. Since the making tax digital plans were announced, small business owners have been arguing against the plans.

“Having listened carefully to the concerns raised by the Treasury Select Committee, parliamentarians and stakeholders, the government is announcing policy changes that will be reflected in the legislation to be introduced.”  – Said in an official statement on parliament.uk

Any business with a turnover of less than £85,000 will now be exempt to have to file quarterly tax returns. However they can if they wish to do so.

For bigger businesses however, those earning over the VAT threshold will be required to start using the quarterly system from 2019 (originally planned for 2018)

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PAYE: Dynamic coding

As of 2nd July 2017 HMRC launched the new system of dynamic coding. This means that under the new system potential underpayments are replaced with in year adjustments (IYAs) Tax codes are adjusted in-year to reflect changes in an employee’s circumstances as soon as HMRC becomes aware of the change.

By using real time data HMRC will be able to change individual tax code in order to adjust, correct or collect any estimated in-year underpayment that arises as result of a change to their tax code. The change means more tax payer will end the year tax balanced and the number of PAYE overpayments or underpayments will reduce.

One of the benefits of this change means PAYE tax payers won’t have to wait until the end of the year for a refund.

 

If you would like to watch a short video containing all the information you need to know about dynamic coding click here

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Making Tax Digital Delay

The government has now delayed making tax digital by “at least” two years until 2020, although quarterly VAT reporting using the system will be mandatory from 2019

Those below the VAT threshold of £85,000 will now be exempt from requirements to quarterly report until the government can reassess the plans

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How taxes change after marriage

pexels-photo-110204Married couples were once viewed as a single taxable unit by the government resulting in you being taxed less after getting married. However this is not the case anymore, now you are mostly taxed individually meaning very few tax benefits. Here are some important things to note that will affect your finances after marriage or a civil partnership:

Married couple’s allowance

Receiving married couples allowance could reduce your tax bill by between £326 and £844.50 a year. You are eligible to receive it if:

  • you’re married or in a civil partnership
  • you’re living with your spouse or civil partner
  • one of you was born before 6 April 1935

As of the 6th April 2000 the married couple tax was not available for couples born after 1935

Marriage Allowance

If you were born after 1935 you could still receive a marriage allowance instead which was introduced in April 2015. This allows you to transfer £1150 of your personal allowance to your Husband, Wife or Civil Partner if they earn more than you. This results in their tax being reduced by £230 in the tax year. You can apply for Marriage allowance if:

  • you’re married or in a civil partnership
  • you don’t earn anything or your income is £11,500 or less
  • your partner’s income is between £11,501 and £45,000 (or £43,000 if you’re in Scotland)

Tax Free Gifts

One of the greatest marriage tax benefits are tax free gifts. Any gifting between you or your spouse is tax free during your lifetime.               You can leave any possessions and property to your spouse after you die and it will be tax free meaning the existing partner gets double the tax-free allowance for inheritance tax.  Also your capital gains tax is effectively doubled, and your spouse can transfer assets between each other during your life time text free.

Will your savings be affected?

You can take advantage of less tax on your savings interest once you’re married providing one of you is in a different tax bracket to the other.  For example if one of you is a basic rate tax-payer and the other does not pay tax  you can keep all your savings in the name of the non tax payer so you both can enjoy tax free interest on it all. However the interest earned must not take them over the taxable income threshold.

You can apply the same rules if one of you is a higher rate tax-payer and the other is a basic rate. You can take advantage of the lower rate tax-payers rate of tax.

 


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How to keep your overheads low when starting a business

When starting a new business it’s important to keep costs low in order to run a profitable business. Here are some costs saving ideas you should be using:

  • Reducing IT costs –

You can start saving money on IT costs by switching to a cloud service.  Since this is web based software they will always be up to date so you won’t have to keep paying out fpexels-photo-374074 (1)or the latest updates. You can also get rid of the expensive data storage and email servers.  Web bases software doesn’t require maintenance or complex instillation so you will save on IT support. It’s best to shop around and compare for the cheapest cloud services.

  • Reducing your phone bill by switching business communications –pexels-photo-29781

Switch to Google voice or Skype to dramatically reduce your phone bill. You can also email, text or tweet to reduce your bill.

  • Reducing premises cost –Startup Stock Photos

You can save money by moving to a smaller premises or allowing staff to work from home. Save money on electricity bills by ensuring all appliances in standby are switched off. You can also switch to low energy light bulbs to cut down on bills.

  • Reducing staff overheads-people-woman-coffee-meeting (1)

Outsource tasks such as bookkeeping. You can use a contract packing service for cheaper mail shots and stock dispatch. Also by choosing freelance workers for specific projects you can gain the expertise  you need without employing expensive permanent staff.

  • Travel cost-effectivelypexels-photo-312848 (1)

Hold teleconferences where possible instead of travelling to meetings. On essential business trips book in advance for train and bus services and for hotel room.

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Everything you need to know about Tax Credits

 

What are Tax Credits?

A tax credit is a state benefit which will give people that are responsible for children, on a lower income or disabled workers additional money.

There are two types of tax credits- Working tax credits or child tax credits. Depending on your circumstances you might qualify for one or both of them.  All tax credits are tax free and you don’t have to be paying national insurance or tax in order to qualify. How much you will get will be determined on your household income and circumstances.

Tax credits are payed by the state straight in to bank accounts via the tax office. If you are 16 or over and live in the UK you can apply.

Working Tax Credits

Working tax credits are eligible to anyone who works. You can apply if:

  • You are age from 16 to 24 and have a child or qualifying disability
  • You are 25 or over with or without children

You also must:

  • Work a certain number of hours a week
  • Get paid for the work you do
  • Have an income below a certain level

The basic amount of working tax credit is up to up to £1960 a year. You could get more or less depending on your circumstances and income. The amount you get will depend on a number of factors such as:

  • Your relationship status – couples need to make joint claims which is based on household income
  • If you have a disability – More is available if for people getting some disability or sickness benefits
  • Your income – The bigger the income the less you’re likely to get
  • Working hours – You must be working over the minimum weekly hours for you to be eligible. Overtime hours will only count if you work them regularly

Child Tax Credits

You may be entitled to claim child tax credit if you’re responsible for children either:

  • Aged 16 or under- you can claim up until the 31st of august after their 16th birthday
  • Under 20 and in eligible education or training

You don’t have to be working to claim child tax credit. Only one household can claim child tax credit for a child. You may also be entitled to more tax credit if your child is disabled.

The amount you can get depends on how many children you have and whether you are making a new claim or are already claiming child tax credit. The amount is dependent on household income, how many children are living with you and how much money you spend on childcare.

Important changes made to child tax credit

As of the 6th April 2017 there have been two major changes to child tax credit.  From this date on you will no longer get:

  • The family element of child tax credit if there are no children on your claim on are born before 6th April 2017
  • The child element of child tax credit for a third or later child born on or after the 6th April 2017 unless they are one of the exceptions listed below.

This only affects children born after the 6th April 2017. Your tax credits won’t change if all your children are born before the 6th April 2017.

Exceptions only apply to the 3rd and later children on a claim who are born before 6th April 2017.

If you already get child tax credit for 2 or more children you may be able to claim the child element for children born on or after the 6th April if one of the following applies:

  • Multiple births – If another pregnancy results in a multiple birth on or after the 6th April 2017 you will get the child element for all but one of those children.
  • A child you’re claiming for has a child – If you get child tax credit for 2 or more children and one of them has a child you can claim for their child. You can continue to claim till they either leave the household or your child makes a claim themselves.
  • You adopt a child – You can claim for an adopted child that is from a local authority care on or after the 6th April 2017.
  • A child born as a result of non-consensual conception-You can claim for this child if you get Child Tax Credit for 2 or more children and a child born on or after 6 April 2017 is likely to have been conceived either as a result of a sexual act which you didn’t or couldn’t consent to or at a time when you were in an abusive relationship, under ongoing control or coercion by the other parent of the child. You can’t claim this if you live with the other parent of the child. You can however qualify for this whether or not there’s been a court case or conviction of a criminal offence.

 

How to claim

To claim tax credits you need to fill in form TC600. You can get this form by completing in HMCR’S tax credit claim form online or you can request a form by phoning 0345 300 3900.

To find out whether you are eligible for child or working tax credit and for what amount you are eligible, use the Government’s Tax Credit Calculator.

If you require any further information on tax credits or have some questions about your eligibility, get in touch by emailing info@wkm-accountancy.co.uk or by calling 0115 8240 555.

WKM Accountancy services welcome new apprentice

Kayleigh Rawson, 20 from Ilkeston is the latest addition to WKM Accountancy services. The steady growth of our company has led to a need to expand our team. Kayleigh is learning all the ropes of being an Account assistant during her one year placement and working toward earning her level 2 diploma in business administration. Her day to day tasks will include writing blog posts, managing social media, administration and bookkeeping.

Commenting on her new position Kayleigh said, “I am thankful for this great opportunity and have already learnt so much in such a short space of time. I am gaining new skills and knowledge every day. I look forward to contributing more in the months ahead.”

Mariah Tompkins, Managing director of WKM Accountancy Services said, “ We are pleased to welcome Kayleigh as part of our Team, the few weeks Kayleigh has been working with us she has shown a lot of commitments and very keen to learn, we feel Kayleigh will play a big part to our business expansion.