September 26, 2017

How much tax will you need to pay in January?

 

Tax, Weliington Consulting, Accountant

How much tax do I need to pay?

 

Every year I hear the same question:

 

‘Where am I going to get the money from to pay my tax bill?’

 

 This is closely followed by:

 

‘How much tax do I need to pay?’

 

The truth is, that from 6th April 2017 the calculation could have been done to establish how much tax you are required to pay. You may have had to wait for statement of interest from savings accounts, P11d forms, if you receive benefits from your employer, or rental statements, if you use an agent to manage your rental properties, but the truth is that by now you should have all the information available to complete it today.

 

If you haven’t, you need to ask ‘why not?’ because…

 

If you run a business, you need to know how profitable it is, where costs can be saved or what investment is needed. You need to be in charge. Leaving the calculations until after the end of the year is not good for sustainability. How do you know how much money to put aside for tax, unless you know what profits you are making? How do you know that you are charging enough to cover the costs, including paying you, unless you know what income and costs you have? If you are not up to date now, when will you be up to date?

 

Note: If you prefer to fill in a paper tax return, you have until 31st October to make sure it arrives with HMRC, otherwise it will have to be done on-line.

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Computer data – how safe is yours?

Do you back up your accounts data onto the same machine you run your accounts software on – even if we are only talking about Excel?

I recently had a call from a client asking them to send me the backup of the data they had sent me for their accounts as their computer had died and I had the only recent backup. Thankfully their systems are good, with this one exception, so they have been able to get up and running quickly.

What would you do?

What would you do?

Another client has sent me their books but had a fire during the year, which included the computer so half the information is in paper format only. It may take a bit longer than usual to prepare their accounts. At least the paper survived to allow me to create the missing bits.

I am not perfect. All the business machines we use on a regular basis are backed each night at 1:30am however, we realised last month that my PAs machine, which lives in its bag when not in use, was missing out. She now has an external disk so she can preserve her work that it not being done directly to the cloud. I also treated it to an external fan so it does not cook in this hot weather.

If you have ever had computer failure, you will understand how long it can take to get up and running. Its not just a case of restoring your computer data. The important thing to remember from an HMRC viewpoint is that you have to keep your records for 6 years plus current so if you change accounts systems over that time you might want to cut a CD/DVD of the data before moving on so that, should the need arise, it could be accessed with help if needed.

If you back up onto a memory stick, make sure it is not only one. One of my clients has a different colour one for each day of the week. Nice touch and certainly avoids confusion. The big question is how much data do you need? I know my backups take about an hour and a half to cloud each night but that includes emails, word documents, photos, spreadsheets as well as mine, and my clients, accounts data. Have a think on what you would struggle to recreate and make sure you don’t wish you had got round to it before.

Business Advice From Berkshire: Increase Your Profits – The Easy Way

Many business owners can get in a rut and keep doing what they have always done. Now is the time to change. Whatever you are doing, there are some things that you should do differently. What are those things in your business?

Firstly, make sure you know what you are spending your money on. Do you know what all the payments are for? Are you still getting benefit from what you are paying out? Are you getting the best deal?

My broadbaIncrase Your Profitsnd was slowing down to the point it was becoming unusable. I have BT Infinity and so I believed it shouldn’t be that bad. I gave in, resigned myself to the fact I would spend hours on the phone and took up the challenge of getting back the speed I was used to. To cut a long story short, after a one hour three minute phone call, my service is working faster than it has done for some while, I am having a new ‘box’ delivered on Wednesday which is three models up from the one I have and will almost double the speed, I will have a year’s cover and my internet will cost me £2 per month less. Time well spent.

I have also reviewed the quality of service I was getting from some of my suppliers and have given them notice and currently sourcing different ones. I am now better educated as to what I need and in a stronger position as a customer than I was when I first needed their services. You may find yourself in a similar position.

Secondly, are you charging the right price? Have your costs, including delivery costs, risen gradually over time and you have not made the necessary adjustments to your prices? Have you clearly defined what you are supplying to your customers so they don’t keep getting free add-ons? I am not just talking about putting your prices up, but simply charging correctly for what you do supply.

If you want to hear more ideas look at the Dates and Events section of my business website at Wellington Consulting and see what takes your fancy. http://wcon.co.uk/dates-events

If you have any suggestions, please leave them below to share with others.

Business Advice from Berkshire – What will make the difference?

In many businesses the most precious asset is the staff. Without good, knowledgeable, dedicated staff you cannot expect to have an outstanding business.

 What do you put in place to ensure your business is the best it can be? It may be something as simple as a headset for the phone so that staff can easily make notes while talking to prospects and customers. This also means they don’t get a crick in their neck and are happy to keep working.

penx Another area that can make a difference is knowledge. Are your staff fully trained to do what you are asking them. I recently spent a day in Somerset with an experienced member of staff who felt she was not using her accounts software to the full so the business hired me for a day’s consultancy, including the cost of travel. They realised the benefit of using what they had better, rather than being average and struggling on as they were. I am often asked to work one to one with a firm as they ‘got the software some time ago but never had any formal training’. By the end of the day they kick themselves when they realise what they could have been doing and the time they could have been saving. All it took was a small investment to quickly get returns that would last them for many years. Even if they changed the software, they can never lose the skill and expectation of what can be achieved.

 As you know, I am a great believer in training and would ask you include it in your budget. You wouldn’t give someone a ball of wool and needles and expect them to knit a jumper. Even if they knew how to knit, they would need a pattern to follow and some guidance as to the expected shape and size. How often do you request something from your staff without giving them the skills and full picture of what is expected?

What can you think of that can make the difference between being an average and being a good supplier to your customers – and your staff? Remember, you are also staff of your business so this applies to YOU!

Business Advice from Berkshire – What lessons have you learned?

Having exhibited at The Business Show at Olympia recently, it gave me the opportunity to speak with many business owners and would be business owners.

Two topics kept re-occurring. The first was that many accountants are not good at communicating with their clients and the other was that successful businesses keep a careful eye on their figures. I believe both the above to be true, but what I found interesting is the number of times I heard them being said to be over the two days of the show.

Penny WellingtonTaking the first point, difficulty in communication, what can be done to address this? If you go on holiday to a country where a different language is spoken, you know it makes sense to learn a few words even if only to be polite and be able to say thank you. The more vocabulary you learn, the easier it is for you and the natives. In many countries, the local population have learned English which means we can take the lazy approach and still be understood without having to put in too much effort. Is it possible to take this approach with your accountant? Learn a bit about their language and what they are doing and it will be much easier for both of you.

The second topic really leads on from the first. By taking an interest in the figures – and by this I don’t mean you actually have to do them – you can monitor the current position of the business and realistically plan for the future. Many business owners would like to be in this position, but expect to do so without learning the basics.

If you do decide to learn the language – and a bit about the culture – I can guarantee it will make a difference to your business. Remember Finance for Business Owners is one of the courses I offer. I also work with larger businesses where the Finance Director believes ‘nobody understands him’. This can be true as the MD is too afraid to ask questions in case he can’t understand the answer. A course in language and Book coverculture can mean everyone can get the most from their holiday – oops I mean work on shaping the business and growing the profits.

Get in touch to book a bespoke course, or for the dates of the classroom courses. Also share your own thoughts on your learnings.

Business Advice from Berkshire – I’ve got round to it – when will you?

There are some things that sit towards the bottom of my ‘to do’ list as I know I ought to do them so won’t actually remove them. They won’t make me instant money nor will they, on the surface, cost me money by not doing them, so why don’t I choose to do them?

IntuitSometimes it just takes will power to go ahead. I have been training QuickBooks since 2004 and been listed as QuickBooks Advisor for many years. Last year they bought out an accreditation scheme so you could take an exam, and become a ‘certified’ version. I downloaded the course material, read it through, decided it was fine as I knew and taught most of it, but never did the exam. This year they have also bought out an accreditation for their On-Line QuickBooks so, as I am on the stand next to Intuit – authors of QuickBooks at The Business Show at Olympia, I thought perhaps I ought to go for it. I am glad to say I passed both exams to a high level so can now be one of their elite team. The only question now is why didn’t I get round to it before?

I have done my personal tax return, I have done my VAT return, how about you? Are there jobs that you don’t fancy that are not time critical yet but you will feel so much better when they are done. It may be they were part of this year’s New Year Resolution. There is still time to complete it before the end of this year.

Go on, take the plunge and share with me what you have or will achieve over the next month.

Business Advice from Berkshire – What are you hiding ?

Do you sometimes wonder why things are not going to plan? Do you have a plan? If I gave you a wipe board and asked you to draw up where you were advertising, where your leads were coming from, what business you were getting from these leads, and what leads you were getting from this new business, would the board be big enough?

So, having drawn up what is actually happening, how does this compare to you plan? Sometimes doing this simple exercise highlights where assumptions have been made, where links are missing and where you could do better.

Penny tennisRecently I was asked how my Finance for Business Owners courses were selling. Not as well as I had hoped was my answer. I then did the exercise above, and guess what, I found out why. Having set up the details on several course sites, I had not set the course to ‘Live’. It is now on Eventbrite, with dates, and the ability for customers to pay. The next thing to do is make sure I tell people!

Another stage I was falling down on was referral business. I had good intentions to contact course attendees, but intentions don’t make things happen, actions do. I have contacted those I taught last month to ask them for feedback. The feedback included “Penny’s presentation was very practical with anecdotes relating to real situations.” And “I found it to be extremely helpful and gave me confidence when I provided training for our client.” This is from a firm of Chartered Accountants in Cornwall. Do I want lots of referral business in Cornwall? I do already have one client down there. But what it did mean was I could pass the contact details on to a firm of Accountants in Kent who were asking about my QuickBooks for Accountants course.

It is good to have an excellent product or service, but even better to tell people about it! That is the bit that makes the money. Just make sure you are charging enough and not just doing it because you enjoy it. See, I had to bring figures into it somehow.

Should you wish to attend the Business Owners course, either give us a call or go ahead and book via Eventbrite. https://pennylowe.eventbrite.co.uk

Business Advice from Berkshire – Would you accept Cash ?

Would you accept cash…

And not put it through the books? With all the current discussion concerning tax evasion and tax avoidance there are still grey areas. You may say that the example above is clearly evasion i.e. personally pocketing money which correctly should be accounted for by the business and tax, and possibly VAT, paid over to HMRC.

Birmingham-20121029-00114What if the cash received is for something other than you usual business activity. An electrician takes some rubbish down to the tip for a neighbour and gets paid for it. Is that taxable income? If he trades as a sole trader, all activities should be included in his tax return – so yes. But is this fair?

If you are sticking to the rules, fairness does not come into it. The rules say that international firms can recharge for services within the group which then means there may be very little income left to charge under the UK tax regime – is this fair?

How well do you sleep at night? Does it matter what others do if you are happy with your decision and any consequences? Using an accountant will help you understand what the rules are. As with speeding, whether you stick to the rules is up to you. Is your accountant a passenger in your car, keeping an eye on your speed, or did you leave them at the last stop and are keeping him in the dark as to what speed you did?

Tax evasion is breaking the speed limit, tax avoidance is using the dual carriageway bypass to get to your destination faster. When you are Book coverpreparing your accounts or submitting your tax return, which route do you take to your destination?

Post your thoughts below

Business Advice from Berkshire – Cost of working at home

gravatarIf you work from home, how do you calculate how much you can claim from the taxman? Over recent weeks, one of my clients has been experiencing a tax investigation. I am glad to say that he got the all clear, but in the meantime, I have had the opportunity to chat with a current tax inspector. When I thanked him for sharing some of the Revenue’s view of allowable expenses and what they look for, he said it was all part of the education process. Whatever the reason, I would extend a thank you.

One area we spoke about was the claim for ‘use of home as office’. He took quite a tight rule on this. He was looking to see if other members of the family also used the room, whether the children had their own access to the internet or used the business computer. How much of the home was taken up with storing papers (or was everything scanned in and only taking up space on the computer). Were there outbuildings for the storage of materials and large equipment used in the business, or were they full of push bikes, lawn mowers and other domestic items.

Although he was asking simple questions, you can see that the Inspector is only trying to establish the truth. Considering whether you are crossing the line between tax avoidance and tax evasion. If you issue one or two invoices a month for working at client’s premises, and it’s a long term contract so you are not spending hours surfing the internet for the next client, what percentage of internet/computer use is actually for work? How would you justify 100% business use?

HMRC have recently brought out an option for claims like this called simplified expenses. You can use them only if a sole trader or partnership. If you want to claim use of home, HMRC will expect you to work for more than 25 hours per month from home. If this is all you do, you can claim £120 per year, 100 hours per month, and it goes up to £216 per year and 200 hours per month is £316. So, instead of the flat rate, you can start to calculate exact components, but this involves square feet, number of people, number of working hours etc. If you have staff coming in with their own key, this adds to the justification.

Book coverThe truth is, it is not easy to be accurate, but you must feel confident that you can justify the figure. This is a time when talking these things through with an accountant – and then documenting the method applied can be very useful.

Have a look at your last set of accounts. Talk to your accountant before signing off this year’s. Remember it is your signature even if the accountant has calculated the figures!

Please share your thought on this subject.

Business Advice from Berkshire │What do others think of your business?

Does it matter? Yes, it does. You are probably familiar with the saying if you are happy tell others, if not, tell us. In business what people say, does matter. Whether it is existing customers recommending you to their contacts or suppliers happy to continue to do business with you.

You may well have a gut feeling, but is that correct? The only way to find out is to ask them. When did you last ask your customers? Have those customers provided testimonials? Even if they are not prepared to provide testimonials, you may find out how they think you can improve your business.

gravatarFor me, a recent survey showed how much they appreciated the personal service I was offering. By working holistically with my clients, I could make sure that any suggestion I made had taken the big picture into account. Many accountants don’t ask the questions to find out what their clients’ plans are. It is easy to offer an opinion on history, but with my professional experience, I take it as a compliment when clients discuss their future and ask what would be best. Although this may be viewed as a standard service offered by accountant, the level of questions can be an indicator of their breadth of thinking before offering an answer. In your industry, if someone asked advice, you would expect to make sure you had all relevant information and future intentions before making a proposal – wouldn’t you?

The benefits of finding out what clients/customers think are numerous. You can see whether the customer view is the same as yours; you can use their responses as testimonials; you can re-excite their interest in your offerings; you can demonstrate you care about them and the quality of service you offer; you can keep in touch.

Last week I sent out an email requesting testimonials and received fifteen replies within 24 hours. Two clients raised an extra point at the end of their reply so it was useful from that point of view as well as gathering testimonials for my updated web site.

Book coverIf I have worked with you before, and you would like to send a testimonial, feel free to email me. Those not used in the revamp of the web site may well be used in other marketing material.

Do respond with a testimonial or a recommendation on LinkedIn. If we are not already linked, feel free to find me and ask to link up via penny@wcon.co.uk.