You may be familiar with the phrase Making Tax Digital (MTD), but for those of you who aren’t, this refers to the overhaul of the tax system which was initiated when Gordon Brown was Chancellor of the Exchequer and was (then) scheduled to go live by 2019. The review included closure of 137 tax offices by 2025, substantial reduction of staff, and the establishment of 13 regional tax offices, and, most importantly, completely new computer systems. However, as a result of various delays the new digital infrastructure is now set to go live by 2020 at the earliest, and there is a huge number of Small to Medium-sized Enterprises (SMEs) which have simply not yet embraced keeping computerised records. It is thus crucial that these businesses take steps to review their accounting records now and take the necessary steps to be ahead of the game.
When you’re running a busy, growing business, it is all too easy to overlook the accounts side, but it’s vital to use accounting software that’ll help you keep track of your business finances without consuming your business running and expansion time. You’ll have heard of some of the options like Intuit QuickBooks, Xero and Sage, but which accounting system should a small or medium business owner or manager select?
Making sense of the options available can be quite a task. Who has the time to trawl the market-place and compare the capabilities and costs of each type of accounting software? At Tarrant Green & Company we’ve guided staff at all levels on accounting and management information systems. For us, it’s not a theoretical exercise, we’ve had experience assessing, implementing and then using a wide variety of different accounting systems, so we know what kinds of accounting software suits the needs of different businesses. Here are a few pointers on selecting accounting software that will make your life easier and ensure you’re in control of your financial information.
Types of accounting software
It’s always preferable for you to maintain your own day-to-day records. A good accounting system will automate routine tasks saving you time and eliminating errors. Your options range from basic single-entry bookkeeping systems to more advanced double-entry systems complete with general ledger, accounts payable and accounts receivables, plus added functionality such as inventory management, fixed assets and invoicing.
Long ago you had to select your accounting software and install it on your own computer system for one or multiple users. This is still an option and its always wise to start out by deciding how many people will need access to the system, but now there are other choices too:
- Accounts software at your premises – you usually pay a license fee to use the software which you load onto your server.
- Software-as-a-service (SaaS) accounting programs – this is a pay-per-use option, with usage costs paid monthly, where the system resides on the software company’s server.
- Cloud computing accounting systems – these plans can start with a free to use service, but generally for serious business use you then need to subscribe to enhanced paid-for services. The system is accessed over the internet.
Your accounting requirements
At its most basic level an accounting system should enable you to keep track of money paid out by the business and money received as customers settle their invoices. But many businesses also have far more sophisticated requirements due to the nature of their operations.
Since every business is different, it’s necessary to identify the accounting functionality that matters most, and this becomes the fundamental requirement for your business:
- Quotes and their conversion to invoices following customer go-ahead
- Invoicing with ready-automation of repeat invoices
- Automated statements and payment reminders
- Payroll including PAYE, National Insurance, sick pay, maternity pay
- Stock management and data output or integration for delivery routes, reorder processes and e-commerce
- Setting up purchase orders and reporting on commitments
- Tracking and reporting on outgoing payments and expenses
- Tracking billable hours and expenses and linking to client invoicing
- Tax calculations and management of tax
- Bank feeds for up-to-the-moment visibility of cash flow
- Reconciliation tools for smart management of finances
- Customisation options and integration with apps
- Management reports for better decision-making
- Admin functions to control access security, user levels and approvals
Don’t forget there’s industry-specific accounts systems
There’s a cost-effective accounts system to suit most business needs. Systems such as VT Transaction, KashFlow and Intuit QuickBooks provide an excellent solution to everyday accounting requirements. We’ve found that clients favour QuickBooks because it is geared to expand with your business, starting at a very cost monthly cost, currently £1.80 per month for the first three months for a basic self-employed person. This is a cloud-based system which grows with your business, and there are very useful add-ons, including mileage tracking, and expenses. It’s easy to use, and has first class support.
But don’t be limited by general accounting systems. For many industry sectors, there are specialist systems too. It’s always worthwhile checking whether software developers have addressed the needs of your industry with a specialist accounting system. For example, at Tarrant Green & Co we’ve identified, installed and trained staff on accounting systems for a variety of legal practices with systems such as Quill Pinpoint, Opsis and Thompson Elite. For sophisticated tax management needs, we’d advocate a system like TaxCalc, which integrates accounting with the generation of tax returns. For debt management companies, Tigersolv is a specialist debt and insolvency system which we’ve successfully implemented.
Need a little help?
Contact Tarrant Green & Co for practical help to select and implement the right accounting system for your business. You can email us at email@example.com or call +44(0)1438 869 644.
The March 2017 Budget was largely as expected, apart from Chancellor Phillip Hammond’s announcement that National Insurance Contributions (NICs) would increase for self-employed workers. But within a week of the budget statement this notion of an extra NIC burden on the self-employed was withdrawn. Significant changes which will go ahead include the dividend allowance being cut to less than half its current level and confirmation that the rate of corporation tax will be cut to 17% in April 2020. Read on to discover how the budget might impact your business. For further details and accountancy support email firstname.lastname@example.org or call +44(0)1438 869 644.
Government U-turn on self-employed burden
The Chancellor announced that National Insurance Contributions (NICs) paid by the self-employed would be levelled out towards the rate paid by the employed. The plan was to increase Class 4 NIC for self-employed people from 9% to 10% starting on the 6 April 2018 and then to 11% from 6 April 2019, bringing it closer to 12% Class 1 NIC employee rate. Flat rate Class 2 NIC contributions which are currently £2.80 a week, would then stop on 5 April 2018
Following criticism that the Government was wrongly targeting the self-employed and had reneged upon its manifesto commitments, a subsequent announcement stated that Class 4 NIC changes would be delayed until the autumn budget and a review undertaken to look at the relative benefits the self-employed are eligible for, compared to employees. Then one week after the original March budget statement, Chancellor Hammond announced a Government U-turn. It has decided not to go ahead with the Class 4 NIC measures set out in the budget. It will continue with Class 2 NIC from April 2018.
That’s good news for the self-employed but it means that the March budget isn’t balanced and the Government will need to plug a £2bn gap in the Autumn 2017 budget. Watch out for myriad niche (but less controversial) taxes to cover the shortfall.
Dividend allowance reduced
The Chancellor announced that the tax-free allowance on dividends will be reduced.
This allowance is currently £5,000 and only came into effect in April 2016. Now it will be cut to £2,000 with effect from 6 April 2018. The move is designed to recoup an estimated £6bn in lost taxes due to owner-managed businesses becoming limited companies to take advantage of this concession. This step will affect individuals who work through limited companies and take out profits as dividends, as well as people who receive a dividend income of over £2,000.
Corporation tax cut
As previously announced the rate of corporation tax rate will be reduced to 19% from 1 April 2017 and then to 17% from 1 April 2020. This change reflects the Government’s commitment to having the lowest rate of corporation tax of all the G20 countries
In Northern Ireland, the rate paid by small and medium sized enterprises will be reduced to enable them to compete with businesses in the Republic of Ireland where the current rate of corporation tax is 12.5%.
Business rates relief
The long-dreaded increase in business rates, due to a reassessment of property values will be softened by several transition measures. Currently 600,000 small businesses get small business rates relief. For any small business coming out of the rate relief scheme, the Chancellor has announced that there will be a cap on the amount of business rates paid, so that no small business pays more than £600 extra in business rates than they did in 2016-17. In addition, pubs can claim a £1,000 discount on their business rates for one year, where their rateable value is up to £100,000, with around 90% of pubs falling into this category. In a final measure to soften the implementation of new rateable values, local authorities will be given a £300,000 million fund which they can use to address cases of hardship, by providing discretionary relief.
Digital reporting deferred for some
Plans for ‘Making Tax Digital for Business’ are well-known and designed to shift reporting online and cut errors by 10%. Non-incorporated businesses and landlords need to start filing data with HMRC on a quarterly basis from April 2018. However, whilst the arguments for digitalising reporting are widely understood, the timescales for making the transition from paper to online have been criticised. Now the Chancellor has announced that businesses with turnover below the VAT threshold, currently £83,000, will be subject to a one-year deferral to April 2019.
Small business cash accounting threshold increased
Currently small businesses can choose the option of cash based accounting where turnover is up to £83,000. The Chancellor announced that from 6 April 2017 this threshold increases to £150,000 turnover, giving more small businesses this choice.
The Government website Gov.uk, explains the measure: “If you run a small business, cash basis accounting may suit you better than traditional accounting. This is because you only need to declare money when it comes in and out of your business. At the end of the tax year, you won’t have to pay Income Tax on money you didn’t receive in your accounting period.” This option no longer applies if turnover goes up above £300,000 in the tax year, in which case traditional accounting methods apply.
Allowances, income tax, and capital gains
The personal tax allowance is to be increased from the current level of £11,000 in 2016-17 up to £11,500 from 6 April 2017. This is the amount that can be earnt before tax.
The basic rate tax band goes up from £32,000 in 2016-17 to £33,500 in 2017-18 and the threshold for the higher rate of tax is set at £45,000. The Government is on track to achieve its stated aim of increasing the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this Parliament.
Also from 2017-18, the capital gains tax annual exemption will increase £11,100 to £11,300.
New rate set for National Living Wage
Currently the National Living Wage is set at £7.20 per hour. In line with the Government’s plans announced in the Autumn 2016 budget, the Chancellor has confirmed the new National Living Wage pay rate of £7.50 per hour from 1 April 2017. It’s a legal requirement for employers pay this rate to workers aged 25 and over. Employers with staff aged under 25 years must pay at least the National Minimum Wage which also goes up from 1 April 2017.
|New rate from 1 April 2017
Full broadband gets closer
The Government is set to invest £200 million to test ways to accelerate access to full-fibre broadband network. Proposals include aggregating the demand of public sector organisations in a locality to offset the investment risk, directly connecting to public buildings like schools thereby bringing full broadband closer to nearby businesses, and opening up public assets such as ducts to enable more cost-effective expansion of the network.
This proposal is in addition to the £1.7bn Broadband Delivery UK programme which intends to enable 95% of premises to access superfast broadband by the end of 2017. Current coverage is estimated at 92%.
Economic forecast better for 2017
Government forecasts for economic growth remain the same up to 2021. However, the forecasts have been revised so that growth is more robust in 2017 and dips from 2018-2020.
This year the forecast for GDP growth from the Office of Budget Responsibility is up to 2%, which is up from 1.8% in 2016 and the previous forecast for the period of 1.4%. Then from 2018-2020 the new forecast predicts lower growth than before of 1.6% in 2018 (was 1.7%), then 1.7% in 2019 (was 2.1%) and 1.9% in 2020 (was 2.1%). Grown is predicted to rise back to 2% (as previously forecast) in 2021.
If you’d like help with accountancy and tax planning for your business, please email email@example.com or call +44(0)1438 869 644.
Against a backdrop of slower forecast growth and rising inflation, businesses can take comfort from the fact that the Chancellor still forecasts that the UK economy will have the fastest growth rate amongst major economies. Positive growth and rising employment are forecast for the next five years. However, the Government’s previously stated aim of achieving a budget surplus by 2019 has been diluted. It now aims to continue reducing the surplus until 2020 and balancing the budget as soon as possible after that. Key measures which will impact business and personal finances are summarised here to help you assess the impact for yourself and your firm:
Lower Corporation Tax on the horizon
Currently set at 20% corporation tax will be cut to 17% by 2020. The Gov.uk website reports that this is “by far the lowest in the G20 and benefitting over 1 million businesses”.
Investment for productivity
A new £23 billion fund, the National Productivity Investment Fund, will help to boost productivity investing in: transport infrastructure, housing, digital communications, and research and development. This includes £27 million for a new expressway linking Cambridge and Oxford.
Funds for housing infrastructure
A new Housing Infrastructure Fund makes £2.3 billion available for housing infrastructure projects such as roads, to support the building of 100,000 new homes where there is greatest demand. A further £1.4 billion is to be used for 40,000 new affordable homes, with £1.7 billion to accelerate house-building on public sector land.
More R&D funds
There will be £2 billion extra per year for investment in research and development by universities and businesses by 2020-21, such as artificial intelligence, industrial biotech and robotic.
Fast fibre-optic broadband roll-out
£1 billion will be available for private sector investment into the roll-out of full-fibre broadband by 2020-21, as well as for trialling 5G networks.
SME growth fund
Small businesses have long been recognised by Government as driving innovation and growth. In this budget, £400 million has been earmarked for investment in innovative small businesses with growth potential, aiding up to £1 billion in new investment.
Investment in future transport options
£390 million investment in future transport technology has been outlined, to include driverless cars and renewable fuels.
Support for the very rural businesses
Rural rate relief goes up from 50% to 100% in April 2017. This tax benefit is designed to support rural businesses operating where less than 3,000 live and applies to businesses which are the only village shop/post office or the only pub/petrol station with a rateable value of up to £8,500 or £12,500 respectively.
Higher tax on products for insurers
From 1 June 2017, the rate of Insurance Premium Tax charged to insurance companies will go up from 10% to 12%.
No more letting agent fees
The Government intends to ban letting agent fees, payable by tenants, which cover activities such as drawing up tenancy agreements and checking tenant status. Consultation is due to begin imminently. These fees cost renters an average of £223 per rental.
Minimum hourly pay rates for 25 year olds
The National Living Wage for those aged 25 goes up from £7.20 per hour to £7.50 per hour from April 2017. A full-time worker on the National Minimum Wage will see their pay increase by £1,400 per year.
Minimum hourly pay rates for under 25s
The National Minimum Wage for those younger than 25 goes up too from April 2017:
- Age 16 -17 from £4.00 per hour to £4.05
- Age 18 – 20 from £5.55 per hour to £5.60
- Age 21 – 24 from £6.95 per hour to £7.05
- Apprentices from £3.40 per hour to £3.50
Increase in untaxed earnings
The amount you can earn before tax will rise from its current level of £11,000 to a Personal Allowance of £11,500 in 2017-18. The threshold for paying the higher rate tax will go up from its current level of £43,000 to £45,000 by 2017-18.
Tax advantages of some salary schemes removed
Certain salary sacrifice schemes, will no longer get preferential tax treatment, such a mobile phone provided as a benefit in kind. Instead they’ll be taxed as if they were a cash income. Current schemes in place before April 2017 can remain the same for up to a year, and for up to four years if they relate to cars, accommodation and school fees. Some schemes will be exempt from this change, they are: pensions, pensions advice, Cycle to Work scheme, ultra-low emission cars and childcare.
New savings bond with guaranteed interest rate
For savers, a new 3-year NS&I Investment Bond will be available from spring 2017, expected to offer a rate of return of 2.2%.
No change on fuel duty
This tax remains frozen for the seventh year in a row, saving individual motorists an estimated £130 a year on average.
Your next steps
For financial management help, including tax advice please contact Tarrant Green & Company. You can email firstname.lastname@example.org or call +44(0)1438 869 644.
Massive changes are taking place in the way the tax department, HMRC, is organised. It’s all part of the transformation initiative at HMRC called ‘Building our Future’. The move is designed to reduce usage of phone, post and face-to-face services by shifting customers to using online services instead. Cost-cutting has not been given a reason for the reorganisation, but costs will be cut. At Tarrant Green & Company we’re concerned that this will impact on a public service that is already failing to hit targets.
What’s going on?
There have already been several major reorganisations within HMRC since the Inland Revenue merged with Customs & Excise in 2005. So what’s happening and what’s the likely impact?
- Over the next 5 years HMRC will close 137 offices around the country, this includes the closure of 43 offices in London and the South East.
- Staffing levels continue to be reduced but no figures have been made available. Around 11,000 staff in personal tax were cut between 2010 -11 and 2014-15, leaving around 60,000 staff.
- Operations will be concentrated into 13 regional hubs located in Newcastle, Manchester, Liverpool, Leeds, Nottingham, Birmingham, Cardiff, Belfast, Glasgow, Edinburgh, Bristol, Croydon and Stratford. These will open from 2016-17 to 2010-21.
- A number of transitional sites will remain open for up to 12 years in Reading, Ipswich, Portsmouth, Washington and subject to lease agreements, East Kilbride.
- The organisation will change at a high level too, four divisions will become three which will be a new customer strategy and tax design group, a customer service group and a customer compliance group – which in fact deals with non-compliance and enforcement! This change begins from 1 October 2016 and should be completed by December 2016.
What does it mean?
In effect, local offices which could be visited for face-to-face queries will no longer exist. It’s all part of the digitisation of the service, with the move to online transactions. Doubtless, online transactions can be quick and convenient. But for anyone with a question, getting a response to their query by phone or post could find this difficult. Anyone who is in dispute with the tax office could find things much harder yet.
HMRC point out that ten years ago just 38,000 tax returns were filed online – today, it’s 8.75 million. Yet despite the logic of their digitisation strategy, HMRC already has a problem with its service standards, as borne out by a review by the National Audit Office (NAO) in July. This cannot be resolved by online services alone. Anyone who has ever tried to resolve a tax issue with the tax office will know how difficult it can be to get a response or clear advice.
Poor service is a real problem
Demand for advice from HMRC has not reduced in line with provision of digital services. In fact, the NAO criticised HMRC for withdrawing frontline staff in personal taxation before their digital strategy was working which resulted in a virtual meltdown in 2014 with staff having to be diverted from PAYE tax administration to cope with the demand. In the first half of 2015-16 call waiting times trebled. At the peak of demand in October 2015, during deadline week for paper tax returns, call waiting times for people calling about self-assessment peaked at 47 minutes. Over 25% of people abandoned their calls due to the excessive waiting times. The NAO also highlighted the increased burden in telephone charges which customers faced. The cost more than doubled from £63m in 2012-13 to £97m in 2015-16.
A recent NAO survey of customers using HMRC services discovered:
- 58% rated the service as good or excellent
- 21% rated the service as poor or terrible
- 21% rated it as average
Satisfaction was highest amongst those who’d used the online service most recently and lowest amongst those who has been in contact by phone. The fact that one in five customers rate the service as poor shows the scale of the problem.
Get the support you need
At Tarrant Green & Company we’ve supported many individuals and businesses with their tax affairs. This includes Personal and Company Tax Returns and advice on tax planning. We also support clients during HMRC investigations and represent them at HMRC Commissioners hearings. If the turmoil at HMRC is causing you difficulties, then do talk to us about our tax advice service. We’re there to help you get things right from the outset and avoid unnecessary hassle. In situations where there is an issue to resolve we’re at hand to help you get the best outcome.
For advice, please email email@example.com or call +44(0)1438 869 644.
As an employer, you can get up to £2,000 a year off your National Insurance bill with the Employment Allowance. This allowance has been available since April 2014 and targets support at small business. It was designed to offset the costs of National Insurance Contributions when employing four full-time staff on the National Minimum Wage.
Businesses have been able to use this allowance to cut the National Insurance Contributions they pay on employee’s wages by up to £2,000.
From April 2016 Employment Allowance will be £3,000
In this summer’s budget, the Chancellor, George Osborne, announced that the Employment Allowance will rise to £3,000 from April 2016. This is to offset the additional costs that small businesses will incur when the National Living Wage is introduced. In effect, a business will be able to employ four full-time staff on the National Living Wage without incurring any employer’s National Insurance Contributions.
Caution: If director is the only employee, no more allowance
There are some exclusions. The allowance will be withdrawn from companies where the director is the only employee. The reason for this is because the Employment Allowance is meant to support recruitment, rather than to help people offset their current tax liabilities.
90,000 businesses to enjoy zero National Insurance Contributions
The new National Living Wage of £7.20 per hour will be compulsory for workers aged 25 from April 2016 and the government plans to increase the rate to reach £9 per hour by 2020.
By providing the new £3,000 Employment Allowance limit, it’s calculated by the Treasury that up to 90,000 employers will benefit with their employer National Insurance Contributions liability reduced to zero.
For accountancy support email firstname.lastname@example.org or call +44(0)1438 869 644.