September 26, 2017

Have you got 31st July in your diary?

tax, self-assessment, HMRC, 31st July, accountant, herefordshire, monmouthshire, gloucestershire

Have you got 31st July in your diary?

 

We may all have put this matter to one side, filing the reminder letter in the unshrinking in-tray, but staying on top of our taxes is vitally important to all small businesses and those who are self employed.

The key is to not fear them or forget them!

 

I know you are busy, time so often our enemy and much better spent delivering our goods and services, but time has to be taken to keep our business affairs in order and avoid any nasty penalties. And if you don’t have the time, engage with someone who has both the time and the expertise.

Diary dates.

So, let’s start by reminding ourselves of the key dates for your diaries regarding taxes:

  • 5th October – registration date for individuals who are self-employed
  • 31st October –paper tax returns completed submission deadline
  • 31st January – online tax returns submission deadline
  • 31st January – deadline to pay taxes you owe
  • AND if you paid more than £1,000 tax on 31st January 2017, you may have more to pay by 31st July 2017.

How do you know if the July 31st deadline is applicable to you?

HMRC state this: ‘If you are self employed and earn enough to pay over £1,000 in tax and you have not already settled all tax due for the year to 5th April 2017, you will need to make a payment by 31st July this year.’

Also, if you have rental income or large amounts of investment income such as dividends, you may also be affected.

There is further information on the gov.juk website, or if you are unsure talk to your/an accountant.

You still have time.

If you haven’t already completed your tax returns, don’t panic! You can still avoid HMRC’s late filing penalties just start taking action now.

  • Gather together all your receipts, bills, bank statements, mileage logs, sales invoices and takings summaries
  • If you have already entered these into a spreadsheet or accounts software, such as QuickBooks Online, well done. It will make your life easier, and you will have a better handle on how the business is doing.
  • Gather other details of income such as bank interest, rental income (and related expenses), P60s and P45s and P11ds from any employment or pension you have. Also pension payments if you can deduct those from your tax bill
  • If you are married, discuss with your spouse whether there is benefit in reallocating some of the personal allowance to the other spouse (10% can be moved although some rules apply)

Decide if you are going to feel brave and prepare your own tax return. If so

And if you would rather have help making sure you are declaring everything and claiming all you can, call me and we can get things sorted.

Penny Lowe, Wellington Consulting

Visit my website to find out more about how I can help you and your business >

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.

Poor Planning leads to..

Have you ever worked late into the night? When did you last feel you could have done a better job if you had had more time? Have you ever missed a deadline? Its all about planning.

Recognising what needs to be done and by when allows you to prioritise your tasks. Your finances should be planned in the same way. You have limited time and know it is down to you how you spend it. Treat your business funds in the same way.

You should have two types of plans which are different views of the same thing. One is a budget which sets out your planned sales, costs of sales and expenses. This may be by month in the coming year and annually for the next couple of years. In addition, you also need a cash flow statement. As it says, this is cash flowing in and out from the business with dates. This type of plan will keep you within overdraft limits, or indicate when you can take a dividend from the business (remembering to leave the money for the tax bill in the business).

A simple example of the difference is sales in a budget may show as £50,000 per month for three months. If your terms are 30 days, the cash flow would show nothing coming in during month one, £60,000 in months two, three and four and cash out of £20,000 also in month four. Where do these figures come from?

The nil in month one is down to £50,000 of sales but no one has paid you yet. Months two, three and four are £60,000 per month being £50,000 of sales plus 20% VAT) paid by your customers for sales in months one, two and three. What about the £20,000 out. This is the VAT you have collected on behalf of the taxman and received in months two and three. That is what I mean by leaving some money in the bank. Don’t forget, you have another tax to save up for as well, being the tax on business profits. Although not due yet, this would be another £30,000 due to go out. (being say 20% corporation tax on £50,000 for 3 months).

With these chunks of money due out, it is important to know, not only what you current bank balance is, but what you need to keep money back for. Even if it is only a rough idea, planning is better than penalties.

Need any help? Contact me.

When should you outsource?

The four reasons why you might outsource are:

Lack of skill
Lack of equipment
Lack of capacity
Cheaper than doing it yourself
The one thing you cannot outsource is the responsibility for completion and quality. That is down to you.

The reasons I have chosen this topic are twofold. Firstly I am writing a book ‘Understanding Your Accounts for the UK Business Owner’. I have outsourced the publication and PR as I do not have the capacity (or the skill) to find appropriate individuals to work with. I know that this may not be the cheapest option, but if my time is available to charge to clients, I can make the money to pay for those with appropriate skills, knowledge and contacts.

The second reason for my choice is I have recently been passed a client who thought they could manage without an external accountant to compile their company accounts and corporation tax returns. Basically they had a go and then buried their head in the sand. It didn’t go away and they ended up with a £20,000 tax bill. Having done the work, the bill should be nearer £2,000 including interest for late paid tax. What they will have to pay are the penalties to Companies House and HMRC. These will be nearly £1,500 in total and could have been avoided. Recognising that you need help or advice and acting can save you money – or at least stop you wasting it.

When considering outsourcing, make sure you are happy with the quality and ability to deliver from your chosen supplier. Having clearly specified your requirements and time frame don’t forget to get progress reports to ensure they are on track. In the meantime make the most of what you can do that you are not outsourcing as you have decided you can do that better and/or more cheaply without compromising the core work.

How much do you put away for tax?

They say the two certainties in life are death and taxes. The big difference is that you know when taxes are due, the same thing can’t usually be said about death.

I have today been to a client who has, for as long as I have known her, religiously put money away each month so that when her VAT bill or tax bill arrives, the money is always there to pay it. When she changed her trading status from sole trader to limited company we sat down and did the figures to make sure she knew approximately how much she would need to have saved and by when. What she now does is put a larger amount aside every month and then pays a dividend to cover her holidays and Christmas. She also pays a monthly salary and has this, and its PAYE, set up on standing order.

work out your tax and put it awayAlthough she would rather not pay tax, she knows the more she pays, the better she is doing. By reviewing her transfers to the company’s second account regularly, she just sighs with a smile when I tell her how much VAT to pay or what her corporation tax bill is. This is different from the reaction of some of my other clients who know when the tax is due, but always think it will be nil. At least that is one excuse as to why they haven’t put money aside.

If you are not sure how much to put aside, speak to your accountant and they should be able to help. Remember it is always better to put too much away and have a nice surprise rather than a nasty shock.

Could your business benefit from this proactive planning ? Contact me and I will be happy to help.