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March Budget – Looking back at the Autumn Statement

As we fast approach Budget day on March 19, will we be in a stronger financial position than we were in 2013?

Let’s take a look into Chancellor George Osborne’s Autumn statement . The Key Points are outlined below.

 

March budget – Looking back at the Autumn Statement

 

PENSIONS

People in their 40s get state pension at – 68
People in 30s at –
69

GROWTH

2013: 1.4%(up from 0.6%)
2014:
2.4%

CUTS

Extra £1bn from government departments each year until 2017

BORROWING

2014-15: £96bn, 2015-16: £79bn, 2018-19: £2bn surplus

 

Economic Growth – BORROWING

Growth forecast for this year increased from 0.6% to 1.4%

 

Benefits & Pensions –

The state pension age is to increase to 68 in the mid-2030s and to 69 in the late 2040s. In April 2014, the state pension will rise by £2.95 a week.

 

Overall welfare spending is to be capped.

 

Anyone aged 18 to 21 claiming benefits without basic English or Maths will be required to undertake training from day one or lose their entitlement. People unemployed for more than six months to be forced to start a traineeship, take work experience or do a community work placement or lose benefits.

 

Taxes & Allowances –  

From April 2015, capital gains tax will be imposed on future gains made by non-residents who sell residential property in the UK.

From 1 January 2014, the rate of the bank levy will rise to 0.156%, and is estimated to raise £2.7bn in 2014-15 and £2.9bn each year from 2015-16.

Employer National Insurance contributions are to be scrapped on 1.5 million jobs for young people.

Stamp duty on shares purchased in exchange traded funds is to be abolished.

The personal income tax allowance will rise to £10,000 from April 2014, and then increase from 2015-16 by the Consumer Prices Index (CPI) measure of inflation.

A married couples and civil partners tax break, which is set to cost about £700m a year, is proposed to start in April 2015, enabling people to transfer £1,000 of their income tax allowance to their partners.

Business rates in England to be capped at 2% rather than linked to RPI inflation, with some retail premises in England to get a discount. Businesses moving into vacant high-street properties will have their rates cut by 50%.

From April, a new tax relief is to be introduced for investment in social enterprises and new social impact bonds.

 

Jobs & Training –  

The number of people claiming unemployment benefits is down 200,000, with unemployment now forecast to fall from 7.6% this year to 7% in 2015. Unemployment is then expected to fall further to 5.6% by 2018.

Total number of jobs to rise by 400,000 this year and 3.1 million jobs predicted to be created by 2019.

A boost in the government’s start-up loans scheme will aim to help 50,000 more people start their own businesses.

Export finance capacity available to support British businesses will be doubled to £50bn.

 

Transport –  

Petrol taxes stay frozen – a planned rise of 2p per litre for next year is to be scrapped.

Regulated train fares will rise in line with inflation, not at 1% above RPI as planned.

The tax disc to show motorists have paid vehicle excise duty is to be replaced with an electronic system.

 

Education & Families –  

An extra 30,000 places at English universities will be created in 2014-15. The following year, the current cap on student numbers will be abolished entirely.

Science, technology and engineering courses will receive increased funding, and a new science centre in Edinburgh University is to be named after Prof Peter Higgs, the discoverer of the Higgs boson particle.

The proportion of young people from disadvantaged backgrounds applying to university is up.

An additional 20,000 apprenticeships are to be funded over the next two years.

All pupils at state schools in England in Reception, Year 1 and Year 2 are to get free school lunches from next September, at an estimated cost of £600m a year.

 

Housing – 

The government hopes £1bn in loans will boost housing developments in Manchester and Leeds, among other sites.

The housing revenue account’s borrowing limit is to rise by £300m.

Councils are to sell off the most expensive social housing and rundown urban housing estates to be regenerated, and workers who live in council houses are to be given priority on housing lists if they need to move home to find a job.

 

 

Infrastructure – 

Tax allowances aiming to encourage investment in shale gas to cut tax on early profits by 50%.

More investment in “quantum technology”, which involves attempting to apply the strange behaviour of materials on a tiny scale to practical purposes, is promised.

 

Overseas Aid – 

The government’s pledge to spend 0.7% of gross national income on international development is to be met without an increase to the current aid budget.

Self-Employed? How to put aside money for Tax

 

If you are registered as self-employed, it’s a good idea to put aside some money for your tax bill.  Getting into the habit of doing this will help you to plan ahead and prevent nasty surprises.

 

How to put aside money for tax?

 

A very general rule of thumb is to keep back a third of what you earn.

This is only a very general rule, as there are a number of other factors to bear in mind:

 

  1. Everyone has a personal allowance, i.e., an amount of tax free income. Click here for 2013-2014 personal allowance rates (opens in a new window, Gov.uk).
  2. You are allowed to claim tax reliefs and allowances on certain items. Click here for details (opens in a new window, Gov.uk)
  3. You are taxed on the profits that you make (i.e., your gross income less tax reliefs/allowances).
  4. Your tax is also dependent on the income tax bands that you fall in, for example, if your income is above £100,000. Click here for further details https://www.gov.uk/income-tax-rates (opens new window, Gov.uk)

 

There is a very handy “Simplied Expenses Checker” on the Gov.uk website here: https://www.gov.uk/simplified-expenses-checker

But note this checker is only suitable if you are a sole trader or a business partnership and should only be used to give you a general guideline.  You should always seek the advice of an accountant for your financial affairs.

HMRC reports that every year, the last minute rush to complete self-assessments on-line results in costly mistakes and items forgotten altogether.

If you need to discuss anything regarding self assessment ,  give us a call on 0203 475 8850 , for an initial consultation.

Outsourcing your accounting

Head in the clouds? Consider what you’ll achieve by outsourcing your accounting.

With more and more businesses trying to keep costs down, outsourcing to a cloud based form of bookkeeping is the ideal solution and it doesn’t mean the business owner loses control over the figures, bookkeeping transactions can be accessed whenever they want to be, it’s on the cloud!

What is cloud accounting?

Cloud accounting is currently THE hot topic in the accountancy world, revolutionising the way we look at finances and accounting. Traditionally, a business would purchase accounting software as a ‘product’ and install this onto their computer systems. With cloud-based accounting everything is documented on-line therefore all the accounting information is accessed via the internet.

By outsourcing your accounting to cloudbased accountants your business will benefit from the very best in financial software support including:

  • Convenient Sage cloud accounting software platform
  • Cloud accounting advice
  • Initial software set up support
  • Bespoke training for finance teams
  • Discounts available for clients purchasing software
  • Professionally qualified accountants, who have been established for over 55 years
  • Central control for all accounts, payroll, cashbook and bookkeeping data
  • Security of Sage cloud technology, keeping data safe
  • 24/7 technical support
  • Annual accounts and tax returns submitted for you
  • Value for money, monthly payment plans

Having support and expertise of a cloudbased accounting service enables you to concentrate on other more important areas of your growing business.

 

To find out how you can transfer your accounting service to cloudbased accounting please feel free to contact us here>>

Is your accountant qualified?

 

 

Many people are not aware that “accountant” can be the name used to describe a range of different people, some of whom may not even be qualified.  This is not like a Solicitor which means someone that is qualified to give you legal advice. So is your accountant qualified?

Anyone in the UK can call themselves an accountant or book-keeper even if they have had no training or have no professional qualifications.  This could mean that you have no comeback for the advice you are given or if any laws are broken.

If you are in business or need advice about your personal finances it would probably be best to engage a professionally qualified accountant, one that has taken and passed the stringent exams set by one of the professional institutes (the ICAEW for example requires the passing of 15 exams and over 3200 hours of relevant work experience).

Members of these professional institutes (shown below) not only have to have professional indemnity insurance to cover them, and you, if anything goes wrong but they also have to abide by the code of professional ethics set by their institute, meaning that if your accountant gets it wrong you can complain to the institute that they belong to.

Here in the UK there are many qualifications that an accountant can hold, these include (in no particular order)

Many qualified accountants may even hold more than one qualification, for example they have both FTII and FCA after their name meaning that they are a fellow of the Charted Institute of Taxation and a Fellow of the Institute of Chartered Accountants in England and Wales.

Each of the institutes show above will allow you to check if someone that is claiming to be a member of their organisation does actually belong and can advise you if this is not the case.

There are also other professional organisations that accountants may belong to, these include :-

  • The ICPA : an Accountancy organisation, representing the 60% of Accountants in practice not represented by the CCAB bodies
  • Institute of Financial Accountants : a professional body for financial accountants and managers primarily serving small and medium enterprises.
  • The Association of International Accountants : a professional accountancy body that promotes the concept of ‘international accounting’ and has created a global network of accountants in over 85 countries worldwide.
  • The Federation of Tax Advisers : Recently merged with the Institute of Financial Accountants and now the tax faculty of the IFA.
  • IAPA : The International Association of Practising Accountants is a global association of independent accountancy and business advisory firms who provide accounting, audit, tax advisory and business consultancy services.

Are you better off as a sole trader or a limited company?

Starting a business is a tough process. Maybe you decided to be a sole trader as there was less formality and paper work involved in the set up.

The decision on your appropriate business structure is not an easy one – it certainly isn’t a ‘one size fits all’ answer.

Your personal circumstances should determine your choice and only you can decide the appropriate structure.

Putting aside the misleading perception that a limited company gives you greater status or credibility then, in my opinion, there are two major issues to consider in deciding your business structure:

Limited or Unlimited Liability

As a sole trader there is no distinction between you and your business.

You do not need to have a separate business bank account.

All the debts of the business are your debts.

If the assets of the business do not cover the debts then your personal assets could be used to pay the debts – including your house!

The debts of a limited company belong to the company, which is a separate legal entity.

Except in cases where personal guarantees have been given, your personal assets will not be used to pay the debts of the company.

Maybe this is a more attractive proposition than a sole trader or unincorporated business structure.

Tax

The second reason for a limited liability business is based on tax savings.

Tax as a Sole Trader

As a sole trader you pay the following:

  • income tax on profits over your personal allowance, assuming no other income
  • Class 2 National Insurance at £2.65 / week
  • Class 4 National Insurance on profits over £7,605 at a rate of 9% up to £42,475 and 2% thereafter

If your profits are below the personal allowance of £8,105 then in all likelihood it would be better to operate as a sole trader.

You will pay no income tax and will only pay a very small amount of class 4 national insurance if your profits are over £7,605.

If you profits are below £5,595 then you can also apply for an exemption to class 2 National Insurance.

Tax as a Limited Company

A limited company pays corporation tax at 20% on its profits (up to £300,000 where the rate rises).

Profits can be withdrawn from the company by way of a salary for the director(s) and dividends for shareholders. Again this assumes that the directors / shareholders have no other income.

 

Why not check how much money you could save by converting to a Limited Company – Contact us on

0203 475 8850 for a free initial consultation

Is there a best time to change accountants?!

Changing your accountant is a serious step. One that is normally only considered when there is a breakdown in the relationship or the fees charged are too steep in relation to the service the accountant is providing.

There may be several other reason you feel it is time to change perhaps you feel your accountant is not keeping up to date with all the technological advances in the financial industry.

How easy is it to change your accountant?

Changing your accountant is normally quite straight forward. It’s normally not practical to wait for an obvious cut-off point such as the end of a financial year. It will, however, be advantageous if you can pick a changeover date when there is as little as possible active business between you and your current accountant,particularly any payments.

Changing your accountant is a business activity like any other, and like any other will run much more smoothly if approached in a businesslike and professional manner. A useful rule of thumb is that the end of your relationship with your accountant will probably mirror the rest of your dealings with them – if you have allowed matters to become uncontrolled then expect difficulties, while a relationship based on information sharing, openness and trust may easily be brought to a conclusion in an amicable and professional way.

If you are considering changing accountant? Why not give us a call on 0203 475 8850 , for an initial consultation.