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If you are self-employed then you usually pay two types of National Insurance:
– Class 2 if your profits are £6,515 or more per year;
– Class 4 if your profits are £9,568 or more per year.
If you’re employed by your own business (i.e on the payroll) then there’s a different class of national insurance that you pay.
As an employer, you also pay Employer’s National Insurance which is just over 13% for most employees.
In lots of ways, National Insurance can appear more complex than income tax and the only way to get an accurate picture if what you need to pay is to talk with us about your specific situation.
Dividend tax is a new tax that was introduced in 2016 and is the tax on the dividends you receive.
You get a very small tax-free allowance, which is currently £2,000 pounds per year.
If you’re a standard rate taxpayer then the Dividend Tax rate is currently 7.5%.
If you’re a higher rate taxpayer then Dividend Tax is 32.5%.
From April 2022 tax on dividend income will increase by 1.25% to help support the NHS and social care.
Yes, you can employ casual labour, as long as they earn less than the current National Insurance, threshold which is currently £120 per week.
If they’re earning more than that then they have to pay National Insurance and so must go on the payroll.
Phase 1 of HMRC’s Making Tax Digital for VAT comes into effect from April 1st 2019 meaning businesses with turnover above £85,000 must change how they prepare and file VAT returns. For those affected:
– HMRC’s online VAT portal will close from April.
– VAT returns must instead be submitted to HMRC through MTD software.
– Businesses must digitally record their VAT transactions and returns using MTD software.
It’s compulsory and affects all businesses.
Corporation Tax and Self Assessment will also be impacted by Making Tax Digital in 2020 and beyond.
Because as long as they’re measuring how they’re performing against a budget, they’re able to make better decisions, sooner.
So businesses with budgets know, every month if something’s going wrong in the business – so they can address the issue and solve it. They’re on top of it. They can react and improve things. Which is why we help most of our clients put effective budgets in place. They make a big difference.
Well, the key to making more profit is to do one or more of the following:
– get more customers;
– increase your prices;
– get customers to come back and buy more often;
– reduce your costs
Which one (or two!) of these to focus on will differ for each business depending on a whole host of factors – which is where a good accountant can usually help.
You don’t have any choice about registering for VAT once your turnover/sales (not profit!) exceeds £85,000 per year. Below that figure, you can choose whether to register for VAT or not.
If you’re just starting out in business but have plans to grow beyond £85,000 per year of sales then in most cases it is sensible and smart to register for VAT when you start out.
We see so many businesses that have to go through so much hassle and grief in their second or third year when they have to add 20% VAT to their prices and life would have been so much easier for them if they had been charging VAT from the beginning.
On the other hand, if your ambition for your business is unlikely to take you beyond £85,000 of turnover then it’s normally best to not register for VAT.
As a sole trader, your profit is like your salary so you get the same tax allowances as an employed person but you then have to pay income tax on your profits above that level.
As a limited company, you’ll pay corporation tax on the profits that the company makes and you’ll also pay personal tax on your dividends.
Then there’s VAT, which you’ll have to charge once your annual sales go above the threshold – which is currently £85,000
And you’ll be liable for payroll taxes and National Insurance if you employ people.
Well, technically, you don’t have to have an accountant.
But there are two main reasons why 99.9% of businesses choose to have an accountant:
a) There is a multitude of tax and legal requirements that you have to comply with when you’re running any kind of business and your accountant will keep you legal and above board on all of them.
Trying to do everything yourself is not normally sensible because of the time it will take you and the knowledge and expertise needed to do all of these things properly;
b) A good accountant will save you tax and help you to grow your profits. He/she will help you to organise things in the right way and also provide advice that will ensure you are better off with an accountant than without.
The right accountant can do so much more for businesses than most business owners realize so choosing the right accountant really does matter. My advice is to use the following criteria when making your decision:
– look for someone you like and get along with;
– someone who can add real value to your business;
– someone who takes the time to understand you and your requirements and doesn’t just talk about themselves and all the things they do;
– fees are obviously important as well. Choosing the cheapest accountant is rarely the right thing to do because you really will get what you pay for and the right accountant should end up putting more money in your pocket through the tax savings and profit growth than the amount you pay them.
Because it’s a good way of utilising your personal tax-free allowance. So you get paid a salary and don’t pay any personal tax on it, and the company also saves the corporation tax on that.
For most businesses putting yourself on the payroll saves you in the region of £1,500 per year in tax.
A shareholder is someone who holds shares in the company. Effectively they are an investor in the business.
Shareholders and Directors are completely different, although with many smaller businesses often they’re the same person, they don’t have to be.
You can have a Director that’s not a shareholder and a shareholder that’s not a Director.
Shareholders do not have the same legal obligations as Directors.
A Director is somebody that runs a limited company.
Directors have legal obligations around the way that they run a limited company.
Every limited company must have at least one Director. For small businesses, that Director is often an employee and a shareholder as well.
Usually, yes – providing you talk with them before the tax bill is due for payment.
They don’t want to be ‘funding’ your business or ‘lending you’ money though but in our experience they will normally arrange a time to pay, providing you can show them that you’ve tried to borrow money from the banks, family, friends etc. first.
You just record all the mileage you do ‘on business’. It’s always best to do it monthly, You can claim 45 per mile for the first 10,000 business miles each year and 25p per mile above that.
You can claim for most things that are ‘wholly and exclusively’ used for your business.
That means that you can claim mileage, travel costs, subsistence, the use of your home as an office etc.
It’s normally best to put all your business spending through your company account or on a company credit card then nothing gets missed.
That normally depends on a couple of factors:
– One is the legal aspect. Do you want the company to be a separate legal entity to you? In many cases, the answer is ‘yes’.
–The other factor is a financial one. Normally if your profit is going to be above about £35,000 per year then you’ll be better off overall as a limited company.
HMRC has got a lot savvier at collecting money in recent years. They used to be quite happy to wait until 10 months after year end, and then get paid. But now they’ve realized they can do a lot more with tax codes and collect more money as a sort of ‘pay–as–you–go’.
That’s why a lot of business owners have seen changes to their tax codes.
Normally, yes.
We recommend that you pay yourself a salary of between £8,000 and £11,500 per year to use all your personal tax-free allowance.
Above that, for most people, it’s normally worth taking additional ‘drawings’ by way of dividend, although the tax savings are not as large now as they were a few years ago.
Your personal tax is due normally twice a year at the end of January, end of July.
You might pay some personal tax through your payroll.
Company tax is always due nine months and a day after your company’s financial year-end.
It’s impossible to give a precise answer to that question without seeing all your information and understanding everything about your business
But there are three things I can promise:
a) You won’t pay a penny more tax with us than you would with any other accountant – and in most cases, we find savings that other firms have missed
b) We do everything within the law – so you’ll have complete peace of mind.
c) The question you should really be asking is ‘how can you help me make and keep more money?’ We find that’s a much more useful approach that makes you considerably wealthier over time.
In most cases, the answer is no.
Cars used to be a huge benefit and perk – years ago people were actually encouraged to drive more miles to pay less tax – but now, unless it’s an electric or a hybrid car, it’s generally not worth having a ‘company car’.
We can do the calculation for you, based on the value of the car, CO2 emissions, etc but in the majority of cases, you’re better off buying a car personally, and claiming mileage through the business.
If you’re getting an electric car or a hybrid then the situation can be different and it can sometimes be worthwhile to buy/lease it through the business.
The only way to get the best advice is to speak with us about your specific situation.
That depends.
We’ve got a menu of services and, in simple terms, the more you pay, the more we do for you and the better service you get.
Most of our clients prefer to pay an all-inclusive fixed monthly fee that includes all the work, meetings, phone calls, etc so they know exactly where they stand and there’s never any surprise bills.
Our principle though, whatever level of service you choose, is that we’ll work super hard to save – or make you – more money than you pay us each year and so our services effectively don’t cost you anything. You’ll be amazed at some of the ways we’re able to help businesses once we sit down and understand them properly.