When should you start outsourcing your accounts?

How to Pay Yourself as a Director (A Simple, Human Guide for SME Founders)

Thu, 16 Apr 2026 11:34:06 GMT

If you run a small business — especially in FMCG, F&B or e‑commerce, you’ve probably asked yourself this at some point:

“What’s the best way to pay myself as a director?”

And honestly, it’s a fair question.

The internet is full of conflicting advice, HMRC’s guidance is written in another language, and most founders just want to know the simplest, safest, most tax‑efficient way to take money out of their own company.

So let’s break it down in plain English, without jargon, and with the clarity you actually need.

The Two Ways Directors Can Pay Themselves

As a director of a UK limited company, you can pay yourself in two main ways:

1. Salary

2. Dividends

Most directors use a combination of both because it gives them stability and tax efficiency.

Let’s look at each one properly.

1. Paying Yourself a Salary

A salary is the foundation of your income as a director.

Why take a salary?

It counts towards your state pension
It gives you access to things like maternity pay and sick pay
It’s a business expense, so it reduces your corporation tax
It gives you a predictable monthly income

How much should you take?

Most directors take a salary around the tax‑free threshold, but the exact amount depends on things like:

Whether your company can claim the Employment Allowance
Whether you have other income
Whether you want to maximise pension contributions
Whether you’re the only employee

There isn’t a one‑size‑fits‑all answer, but there is a right answer for your situation.

2. Paying Yourself Dividends

Dividends are payments you take from profits after corporation tax.

Why directors like dividends:

They’re taxed at a lower rate than a salary
There’s no National Insurance
You can take them whenever you want (as long as the company has profits)

But there are rules:

You can only take dividends from actual profits
You need proper bookkeeping to know what those profits are
You must document dividends correctly (board minutes + vouchers)

This is where many SMEs get caught out: taking dividends without checking real profitability.

A Quick Note About Pensions (Often Overlooked, Always Powerful)

This is the part most founders don’t realise:

Employer pension contributions are one of the most tax‑efficient ways to pay yourself.

Here’s why they matter:

They’re paid directly by the company
They’re treated as an allowable business expense
They reduce your corporation tax
You don’t pay personal tax or National Insurance on them
They help you build long‑term wealth in a tax‑efficient way

For many directors, pensions are the quiet hero of their pay strategy.

I mportant: How Dividends Are Taxed (And What’s Changing)

This is the part that often surprises founders.

1. The company pays tax first

Your company pays corporation tax on its profits.

Only after that can dividends be taken.

2. Then you pay tax personally on the dividend

Dividends are taxed separately from salary, and at different rates.

So yes, the same money is taxed twice:

Once in the company
Once in your hands

This is normal for UK limited companies.

3. Dividend tax rates are increasing from April 2026

This is important for planning.

From April 2026, dividend tax rates are rising, which means:

Dividends will still be tax‑efficient
But the gap between salary and dividend tax is narrowing
Pension contributions become even more attractive
Planning your mix of salary/dividends matters more than ever

If you’re used to taking large dividends, it’s worth reviewing your structure before the new rates kick in.

Salary vs Dividends: What’s Best?

Here’s the simple version:

Salary gives you stability
Dividends give you tax efficiency
Pensions give you long‑term tax‑free extraction
A mix gives you the best of everything

Most SME directors take a small salary, top up with dividends, and use pension contributions strategically.

How Much Can You Actually Take?

This is the part founders often misunderstand.

You can only take money out of your business if the business can afford it, not just today, but over the next few months.

To know that, you need:

Clean bookkeeping
A clear view of your profits
Awareness of upcoming VAT bills
A simple cashflow forecast
An estimate of your corporation tax

Without this, paying yourself becomes guesswork.

And guesswork is how directors accidentally end up with an overdrawn director’s loan account — which comes with extra tax charges and headaches.

A Simple, Founder‑Friendly Way to Pay Yourself

Here’s the structure that works for most SMEs:

Decide your salary level
Set up proper payroll
Keep your bookkeeping clean
Check your cashflow before taking dividends
Document dividends properly
Use pension contributions strategically
Review your pay structure every year

It doesn’t need to be complicated.

It just needs to be consistent.

How Kubedsolutions Helps Directors Pay Themselves Properly

We work with SMEs, especially FMCG, F&B and e‑commerce brands, because we understand the realities you deal with:

Seasonal sales
Long payment terms
Inventory cycles
Marketplace fees
Food VAT
Margin pressure
Rapid growth with messy numbers

We help you:

Set the right salary
Take dividends safely
Avoid overdrawn loan accounts
Plan ahead for tax
Use pensions strategically
Prepare for the 2026 dividend tax changes
Keep your cash flow stable
Make decisions with confidence

No jargon.

No judgement.

Just clarity and calm.

What Do I Need to Know About Year-End Accounting for My Limited Company?

Tue, 21 Mar 2023 16:25:40 GMT

What is Year-End Reporting?

Financial year-end reporting is the legal process in which limited companies must send certain information to HMRC and Companies House. This must be done by the end of the company's personal financial year, ie the day before the start day or ‘birthday’ - not the end of the tax year (5 April). A company’s start day may be, for example, the date specified when you registered with Companies House, or the date the company started trading.

Year-end reporting must be done so that the company pays the correct amount of tax, and provides the public, shareholders, banks and potential investors with the correct information about the company. Financial year-end reporting is usually done by an accountant or accountancy firm (such as us here at Kubed Solutions), for the entire financial year - which is usually the same as your corporation tax accounting period.

What Information Do I Need to Report?

There are two key documents you need to send for reporting your accounting period. Your Company Tax Return must be sent to HMRC so they can calculate how much corporation tax you owe. Also known as form CT600, this document presents the company’s turnover, expenses, tax allowances and profit, in the form of the company’s Statutory Accounts.

Your Statutory Accounts must be sent to Company House. Also known as your Annual Accounts, this document details and summarises the company's financial activity within that year, primarily for the benefit of HMRC and the company's shareholders. Statutory accounts describe overall expenses and income as opposed to individual transactions, and are made up of the following:

Income Statement: aka a ‘profit and loss account’; shows the company’s sales, running costs and the profit or loss it has made over the financial year;

Statement of Finacial Position*: aka a ‘balance sheet’, shows the overall value of everything the company owns, owes and is owed (ie business's assets and liabilities, and the total difference between them) on the last day of the financial year;

Director’s report: a report on the state of the company by the board of directors; not required if you’re a ‘micro-entity’; and

Footnotes about the accounts*: additional information to clarify the other sections.

*published by Companies House for general viewing.

Producing your statutory accounts can help you understand your day-to-day operational costs and all the other essential aspects of your business's finances, which may be useful for you as a business owner.

Is There a Deadline for Financial Reporting?

There are a number of deadlines you need to be aware of when submitting the two documents to both authorities:

There is a shorter deadline for paying corporation tax than there is for filing your Company Tax Return, meaning your company may end up submitting its tax return after paying tax for it. This shouldn’t be too much of an issue though, as your accountant will be able to estimate how much tax is due, and overpayments can be dealt with later. Nonetheless, submitting your tax return as early as possible rather than waiting for the deadline is the best practice to ensure you pay the correct amount of tax.

Should you miss a deadline for reporting or paying tax, you’ll receive an automatic penalty which you’ll have to pay to the relevant authorities (HMRC and Companies House). Try to avoid late filing as you could be taken off the register, and even if this does not happen, you will still have to pay a fine depending on how late they are:

What Are My Other Reporting Duties?

There are some reporting that are convenient to do at the same time as your year-end reporting, although it technically isn’t part of your year-end reporting. These include your VAT returns which are usually also due at the end of your company’s financial year and your Confirmation Statement whereby you are required by law to confirm your company information with Companies House on a yearly basis. Your statement must be filed 14 days before the due date: a year after either your incorporation date or the date of the previous statement. You must submit this even for a dormant company, and failure to do so (for any company, dormant or active) may be considered a criminal offence.graph

What Do I Need to Do to Facilitate My Year-End Reporting?

Be sure to follow this handy checklist which will help make the year-end reporting process smoother for you:

Preparation - give yourself at least a month in advance to prep; put your staff on a ‘year-end footing’ so they dedicate more time, effort and focus to chase orders and invoices, reduce expenditure, file expenses and ensure they have all relevant documents to hand.
Paperwork - gather all your paper and online documents (income records, bank statements, statements of account from suppliers, invoices, and receipts) so you can access them quickly and easily in case your financial reporting is challenged.
Overdue payments - chase up unpaid invoices well before the deadline of the reporting and bank as many payments as you can, to ensure accurate accounts and avoid paying tax on money you don’t have yet.
Expenses - keep track of all of your expenses as expenses reduce your profits, meaning you pay less corporation tax. You can claim anything the company has bought ‘wholly and exclusively’ for business use as an expense on your Company Tax Return.
Accounts vs records - cross-check the figures in your accounts and tax return against the figures in your supporting documents eg bank statements, invoices etc. Ensure unpaid sales made are listed as outstanding debts owed instead of revenue and note any invoices where there is a risk of no payment.
Employee data - make sure all information on your staff is up to date (payroll, benefits and expenses), as you’ll be liable for mistakes relating to tax or National Insurance. Insist that employees provide the correct receipts if they are claiming expenses.
Backups - make and organise regular backups of your accounts and tax returns in progress, so if you lose any data, you can pick up from where you left off.

Hire an accountant - an experienced accountant or accountancy firm can ensure your year-end reporting process is smooth and accurate. An accountant you can connect to on a personal level would be particularly useful in leaning on them should you need to be relieved from the stress that year-end reporting brings.

At Kubed Solutions, we can assist you with your year-end accounting as well as any other accounting needs, and we can also act as a confidante and mentor during times of tension caused by financial reporting or any other business-related worries you may have. Be sure to get in contact with us today for a free 30-minute consultation by calling 07762657277.

What Do I Need to Know About Capital/Revenue Expenditures and Gains/Losses From Capital Assets?

Sun, 19 Feb 2023 23:01:24 GMT

What is the Difference Between a Capital Expenditure and a Revenue Expenditure?

Knowing the difference between capital expenditure and revenue expenditure is crucial when filing your tax return and claiming for business expenses and super deductions. Capital expenditure is the use of funds to acquire, maintain or upgrade physical fixed assets. This type of expenditure is made to leverage growth and financial stability within a business.

Contrastingly, revenue expenditure is a cost charged to expenses related to specific revenue transactions or operating periods for running the day-to-day business and the maintenance costs needed to keep assets in working order. The matching principle is used to link the expense incurred to revenues generated in the same operating period, thereby yielding the most accurate income statement results.

Capital and revenue expenditures vary in the timing of when they are charged, assumed consumption period and monetary size.

What Are Some Examples of Capital and Revenue Expenditure?

There are normally two forms of capital expenditures : acquisition expenditures - expenses to maintain levels of operation present within the company, and expansion expenditures - expenses that will enable an increase in future growth. A capital expense can either be tangible (eg a machine) or intangible (eg a patent) - both can be considered assets as they can be sold when there is a need.

Buildings and Property: Purchases of property, plant and equipment are often facilitated using secured debt or a mortgage, whereby the payments are made over many years. Make sure you know what is considered a repair (not extending the useful life of the asset) and a capital upgrade;
Upgrades to Equipment: if these upgrades are higher than the capitalisation limit that is in place, the costs should be depreciated over time. Equipment upgrades are often financed and the cost of this may be depreciated also;
Software Upgrades: these are a significant cost for large companies and can be depreciated if they meet specific criteria. Internal research and development expenses related to creating new software must be capitalised and depreciated over the life of the asset (including fees paid to external parties that assisted with the software development, costs for long-term software, payroll for employees that worked on the development, travel in connection with the development);
Computer Equipment: this includes servers, laptops, desktop computers, and peripherals, and must have a useful life of greater than one year. A company may set an internal materiality threshold to avoid capitalising every calculator purchased and held for greater than a year;
Vehicles - companies often need a fleet of vehicles for distribution or to carry out services for customers, such as delivery companies. These vehicles are considered capital expenditures, regardless of whether they were purchased outright or financed with debt. However, the costs for leasing vehicles are treated as operational expenses; and
Intangible Assets - assets don't all need to be physical or tangible. If a company purchased a patent or a license, it could be considered a capital expenditure.

Revenue expenditures can be split into direct and indirect expenses. Direct expenses occur from the production of raw materials to final goods and services. The direct expense example is wages of labour, shipping cost, power, electricity bill cost, rent, commission, legal expense, etc. Indirect expense occurs indirectly; they are generated in connection with selling goods and services and their distribution. Indirect expense examples are machinery, depreciation, wages, etc.

Repair and Maintenance of the Assets: incurred for supporting the business’s current operations and do not affect the asset’s life;
Wages paid to workers of the Factory: required to work for the company and run the business to generate revenues;
Utility Expenses: expenses incurred on phone bills, water bills, electricity bills, etc., are required to be spent by the company to continue its business operation and generate revenue - the working of the businesses cannot effectively take place without these resources;
Selling Expenses: required for selling the products timely (used to promote and market the products to the customers) thus increasing the business sales;
Rent Expense: expenses incurred in renting the premises the business operates on and/or renting the other materials; and
Other Expenses: any other expenses related to generating the revenue of the business or maintenance of revenue-generating assets.

How Do I Deal With Gains From Different Types of Capital Assets?

For businesses, a capital asset is an asset with a useful life longer than a year that is not intended for sale in the regular course of the business's operation. It is important to know what to do should you experience gain or loss with your business’ capital assets.

A capital gain is an increase in the value of a capital asset when it is sold. It occurs when you sell an asset for more than what you originally paid for it. Capital gains are either short-term - realised on assets that you've sold after holding them for one year or less, or long-term - realised on assets that you've sold after holding them for more than one year.

You may have to pay Capital Gains Tax if you make a profit (gain) when you sell (or dispose of) all or part of a business asset, such as

Land and buildings;
Fixtures and fittings;
Plant and machinery, eg a digger;
Shares;
Registered trademarks;
Your business’s Goodwill.

A gain is a difference between what you paid for your business asset and what you sold it for. Use the market value instead if you:

Gave it away (different rules apply if it was to your spouse, civil partner or a charity);
Sold it for less than it was worth to help the buyer;
Inherited the asset (and do not know the Inheritance Tax value); and
Owned it before April 1982.

If the asset was given to you and you claimed Gift Hold-Over Relief, use the amount it was originally bought for to work out your gain. If you paid less than it was worth, use the amount you paid for it.

You can deduct certain costs of buying, selling or improving your asset from your gain, including

Fees, eg for valuing or advertising assets;
Costs to improve assets (but not normal repairs); and
Stamp Duty Land Tax and VAT (unless you can reclaim the VAT).

There are, however, certain costs you cannot deduct, including

Interest on a loan to buy your asset; and
Costs you can claim as business expenses

When you know your gain you need to work out if you need to report and pay Capital Gains Tax. If you’re in a business partnership, work out your share of each gain or loss; then the nominated partner must fill in form SA803.

if you’re eligible for tax relief, you may be able to reduce or delay the amount of Capital Gains Tax you have to pay:

How Do I Deal With Losses From Different Types of Capital Assets?

A capital loss occurs when a capital asset, such as an investment or real estate, decreases in value. This loss is not realised until the asset is sold for a price that is lower than the original purchase price. Such losses are subtracted from any chargeable gains which the company has for the same accounting period. The remainder is carried forward for set-off against gains of future periods. In some circumstances, however, relief for losses may be restricted or denied under anti-avoidance legislation.

A loss on a disposal to a connected person is deductible only from chargeable gains arising on disposals to that same person while they are still connected - known as ‘clogged losses’. As of April 2020, relief for carried-forward losses may be restricted in a similar way to income losses. An annual £5 million deductions allowance must be shared between income and capital losses in a ratio chosen by the company. The purpose of capital loss restriction is to limit the number of chargeable gains that can be set off against carried-forward losses to 50% - specifically, where the losses surpass the amount of the deductions allowance that is allocated to chargeable gains.

If you have a capital asset that is lost or destroyed, this must be treated as a disposal. If you receive compensation, the amount of compensation you receive is treated as the sales proceeds. If shares you own lose all or most of their value, due to the company involved either stopping trading or going into liquidation or receivership, you might be able to make a ‘negligible value claim’.

When you make a negligible value claim, if all the conditions are met, they are treated as if you sold the shares and then bought them back again at their value (creating a loss) on the earliest of the following dates:

The date that HMRC receives the claim; and
A date you specify on the claim that may be
in either of the two previous tax years if the shares became worthless/ almost worthless at that time or
earlier, allowing you to treat the loss as arising in a different tax year – this may be important if you have large gains in one of the two years as it could help you minimise any capital gains tax bill.

You then work out your capital loss as if you sold the shares for their negligible value on that date.

In conclusion, it's crucial to know the difference between capital expenditure and revenue expenditure. Understanding each type of expenditure will enable you to classify them correctly in the accounts. Also, each type of expenditure will determine the tax you pay - depending on whether you write them off or capitalise them - and if you can claim for business expenses, as well as super deductions which are available only until 31 March 2023.

If you need further clarity in regards to your business capital and revenue expenses, as well as what to do if your capital assets have gains or losses, do not hesitate to contact us here at Kubed Solutions for a free 30-minute consultation by calling 07762657277.

What Do I Need To Know Before Getting Or Using A Car For My Business

Tue, 24 Jan 2023 10:36:41 GMT

You may decide to use a car for business for a variety of purposes, including business trips, visiting clients, work events and aiding operations relating to the business. If you believe your business could benefit from the usage of a car but are unsure about getting one as well as the type of car to get, we're here to break down buying vs leasing a car for your business, using a pool vs company car, whether or not to consider using an electric car, the tax advantages and disadvantages of all these options.

Can I Use a Personal Car for Business?

If you buy a car only for personal use, you won't be able to claim any expenses for tax relief. If you use your personal car for work purposes other than for commuting to and from work, you can claim this as a business expense for your own business or a claim from your employer. One method of calculating such vehicle expenses is using a fixed mileage rate set by HMRC, whereby you can reclaim:

45p per mile if you've travelled less than 10,000 business miles per tax year, and
25p per mile business miles over 10,000.

this applies to cars and vans only - motorcycles and bikes have different mileage rates.

Your employer can then claim these reimbursement costs as an expense and claim corporation tax relief. Any costs reimbursed above the mileage allowance will count as income and will be subject to tax and National Insurance, and will be taxed at your personal income tax rate; this is also applicable to company directors. Click here to read our blog post on a more in-depth guide to methods for claiming motor expenses.

Buying a Non-Electric Car for Business

If you don't want to use your personal car for business purposes, you can buy a pool or company car to use instead. A pool car can be used by all employees exclusively for business usage while a company car is only available to individual employees for private as well as business usage. It is vital to know the difference between the two types of cars as each has different tax implications.

If you buy a pool car for your limited company, you can reclaim the VAT and claim capital allowances, aka tax relief related to long-term business assets. You can do this via a writing-down allowance, whereby you depreciate a percentage of the car's value every year. According to HMR, the CO₂ emissions will determine the percentage that is deducted:

You may be offered the most tax relief from choosing to buy a pool car. However, depending on the car's needs, it may not be the right option for your business due to the stringent requirements of what a pool car is. You may, as a director, opt for buying a company car through your limited company. If you do, you can only reclaim VAT on business-related expenses eg MOT and service, car insurance etc.

Moreover, a company car used for personal and business purposes will incur Benefit in Kind (BiK) tax (up to 37% for petrol and diesel cars depending on their emissions) - for which the company will be required to fill in a P11D and P11D(b) form. Benefit in Kind is seen as a perk from the company, and so the receiver of this perk (aka the individual who uses this company car) will have to pay tax on the value of the perk at their personal income tax rates (between 20-45% depending on their income band). Limited company directors will additionally have to pay 13.8% National Insurance on the benefit value.

Be aware that it may not be worth buying a company car should the BiK increases your income to the point where you join the next income tax band.

Leasing a Non-Electric Car for Business

Some business owners in need of a car may choose to go down the leasing route, whereby the company rents a car for a monthly payment for a specific time period. You may find it more cost-effective to lease a pool car rather than buy it. You won't be able to claim capital expenses because the asset (car) is not owned by you. However, the lease payments count as a business expense that you'll be able to claim. The amount which your limited company can claim against the company’s corporation tax bill is dependent on an allowance based on the CO₂ emissions of the car.

Furthermore, you will also be able to reclaim the VAT on lease payments, so long as the users adhere to the requirements the car as a pool car (no personal use, used by more than one employee).

With regards to leasing a company car rather than a pool car, car leasing companies are known to provide a cheaper deal for business cars compared to personal car leases. Also, you will normally be able to recover 50% of the VAT charged; the 50% block on VAT recovery is to cover the private use of the car.

While this may seem like a benefit in terms of cost, leasing company cars may well be one of the least cost-effective methods of using a car for your business. You cannot claim capital allowances - as with leasing a pool car - but additionally, because it still counts as a Benefit in Kind, you'd still be subject to pay personal income tax as well as NI on the value of the vehicle.

Buying or Leasing an Electric Car via Your Business

Following the government’s plans to eliminate the sale of all petrol and diesel cars by 2030 and hybrid cars by 2035, the use of electric cars is on the rise - including for businesses. It is therefore important to know the cost implications of doing so.

100% of your capital allowance can be claimed against your tax bill in the first year of buying and using an electric car. The company may also make further savings on their corporation tax on monthly payments interest, should the car be acquired under a Hire Purchase agreement (whereby the buyer pays an initial instalment followed by instalments of the balance plus interest over time). Leased cars can additionally benefit from a reduction of the company’s profit and corporation tax for the year, as the monthly rentals for the car count as an expense in the profit and loss account.

In terms of VAT, you can reclaim the 20% VAT from buying a car if the car is used exclusively for business purposes (not including commuting), while 50% can be reclaimed from leasing a car. The 130% super deduction (which you can read about in our blog post here ) granted by the government for businesses investing in ‘plants and machinery', including electric vehicle charging points, qualifies until March 2023, saving your business further.

Moreover, while electric business cars used also for personal uses are subject to Benefit in Kind tax, just as other types of cars are, it is at a significantly lower BiK rate of 2% of the car’s list price. Tax and national insurance on BiK may be paid by the employee and/or the company:

Amount employee will pay = list price of the car x 2% (current BIK rate for electric cars) x employee’s income tax rate
Amount company will pay = list price of the car x 2% (current BIK rate for electric cars) x 13.8% (employers national insurance rate)

For charging points, the installation at an employee’s address, associated with the car, as well as its electricity use for charging it, does not count as a BiK (including businesses using a home office). Drivers of the car can either:

Pay for the cost of home and/ or public charging the car upfront and then reclaim the costs; or
Log their private mileage (including commuting to and from work) and have the costs of this personal mileage deducted from the driver’s salary after their employer has paid for all electricity costs.

To conclude, you need to consider many factors before you start implementing the use of a car for your business, such as the type of car, how it will be purchased and how it will be used. Doing so will ensure that the decisions you make are the most tax-efficient.

If you're a business owner and need any more information before you invest in a car for your business, or need help calculating which methods will offer you the most tax relief based on the specific needs of a car for your business, do not hesitate to contact us here at Kubed Solutions for a free 30-minute consultation by calling 07762657277.

What Information Does My Accountant Need to Complete My Self-Assessment Tax Return?

183:790115154 (Gouri Kubair) — Wed, 21 Dec 2022 10:53:57 GMT

The due date for your upcoming self-assessment tax return to be completed for the tax year 6 April 2021 to 5 April 2022 (2021/22) is January 31st 2023. Filing your self-assessment tax return on time is crucial and you may have to pay interest and a penalty if you file it too late. It is, therefore, best to submit it as early as possible.

If you are seeking guidance from an accountant, be sure to have all the relevant information to hand, for it to be completed smoothly. Information required to complete your self-assessment tax return can be split into income-related information, tax relief-related information and other relevant miscellaneous information.

Income

Employment

You should have a P60 or P45 form for every employment held during the tax year. These forms are issued by your employer(s) and detail your taxable income and tax deduction for the tax year. While these forms are similar, they differ in when they're issued and the student loan information deduction information included:

P60 is issued at the end of the tax year (April 5th) and will include any student loan deductions made.
P45 is issued when you leave a job during a tax year and does not include any student loan deductions made, so you will need to provide your payslips for the year.

Your employer may also issue you with a P11D form at the end of the tax year if you have received any taxable benefits that aren't on your payslip. Your employer needs to provide this by July 6th following the end of the tax year. You may be given two P11Ds if you had two jobs during the year. Examples of benefits provided by employers include

Company cars;
Loans for rail season tickets;
Other loans;
Health insurance;
Assets provided to an employee that has significant personal use;
Self Assessment fees paid by the company;
Non-business travel expenses; and
Non-business entertainment expenses.

Bank Interest

You should be issued a statement from your bank (for every bank account you have) showing the amount of interest you received for the tax year. You can also add up the amount of interest you received for each month of the year. The total amount of interest you received for the year should be paid with no tax deducted. This does not include non-taxable interest information (e.g. from cash ISAs, premium bond receipts or interest from NS&I tax-free products, namely Fixed Interest Savings Certificates and Index-linked Savings Certificates).

Dividends

You need to provide your accountant with dividend vouchers for the tax year if you hold personal Investments, even those contained within an ISA. Any dividends received as a limited company director will also need to be considered for the tax return.

Pension

The relevant documents should be given to your accountant if you receive state or private pensions.

State pensions are paid every 4 weeks. You should receive an annual letter from HMRC explaining how much the pension is increasing, which you need to provide with this document. You can alternatively provide bank statements showing the 4-week period payment figures for your state pension during the year.

You should be given a P60 for private pensions which you can give to your accountant.

Other Income

If you have sold any shares or other assets during the tax year, you will need to provide your accountant with information relating to Capital Gains , ie what you sold, when it was sold and how much it was sold for, as well as the purchase date, price and all other costs relevant to the asset.

If you are a UK resident, you'll need to provide details of Foreign Income you've received during the tax year including any foreign taxes you have paid.

If there is any Other Income you receive, discuss it with your accountant to ensure it is included on your tax return.

Relief

Work-Related Expenses

You can claim tax relief for both employment and self-employment business expenses you've incurred. Employment expenses include:

Business travel mileage - provide your accountant with the number of business miles travelled and the rate your employer reimbursed you. The tax rate per business mile is as follows:
Cars and vans - 45p (first 10,000 miles), 25p (> 10,000 miles).
Motorcycles - 24p.
Bikes - 20p.
Clothing - you can find out what flat rate expenses you can claim for uniforms and tools, as well as cleaning-related allowances;
Entertainment - business-related entertainment with a cost per head under £150;
Capital allowances, eg machinery or business-related fixtures; and
Professional subscriptions - any memberships held to a professional body, which you'll need to provide proof of payment for (bank statement, invoice).

You can also check out our blog all about work-related expenses you can claim if you're self-employed and work from home.

Pension Contributions

You can claim tax relief for any personal pension schemes you contribute to, so long as you can provide:

The name of the provider;
Your contract/membership number;
The amounts of the contributions;
The dates of the contributions.

Your company can also arrange two types of pension contribution schemes on your behalf

Before-tax contribution - referred to as 'net pay' in your pension documents; you'll only need to provide your accountant with information if you've exceeded the pension threshold and you would have already received full tax relief on these contributions.
After-tax contribution - referred to as ‘relief at source' in your pension documents; you'll need to provide your accountant with your payslips for the full tax year as you may be able to claim additional tax relief on these contributions.

Your most recent payslip can be given to your accountant should need further guidance as to which arrangement your company uses.

SEIS/EIS

You should be able to claim tax relief if you invest in an Enterprise Investment Scheme (EIS/SEIS). If you do invest in an EIS/SEIS, HMRC should give you a certificate (form SEIS3) for each investment, which you need to give your accountant (as well as any further details related to the investment, but this can be discussed with your accountant on a case-by-case basis).

Charitable Giving

If you are a higher-rate taxpayer who has made donations to a qualifying charity and claimed gift aid, you may be able to claim additional tax relief if you can provide your accountant with the following information:

Charity name
Donation date
Donation amount
Gift aid claimed (yes/no)

We would advise you to log in to your just giving account and print out your past donations to make it even easier for both you and your accountant.

Other Information

Change in Circumstances

Your records need to be updated if you have had a change in/to your:

Name;
Marital status;
Address; and
Number of dependents.

Tax Code

Any tax coding notices given to you by HMRC during the tax year should be given to your accountant.

Marriage Allowance

You can save £200 in tax if one spouse is below the higher rate threshold (£50,000 for the tax year 2020/21) and the other spouse is below the personal allowance (£12,500 for 2020/21). You will need to provide your partner’s details, name, national insurance number & date of marriage in order to claim marriage allowance.

Pension Contribution Thresholds

You can contribute up to £40,000 a year into a pension scheme for tax relief purposes, so long as you have less than £110,000 of taxable income per year.

You will need to give your accountant the details of your pension contributions (employer and employee) for the current year as well as the three previous years (you should be able to bring forward unused allowances) if you earn more than £110,000. Your pension providers should send you annual statements.

Timeline

Below is a handy timeline of important upcoming dates you need to know for filing your self-assessment tax return (the timeline is in relation to the tax year 2021/22, however, the dates can be applied to future tax years):

April 5th 2022 - end of 2020/21 tax year.*
April 6th to July 31st 2022 - this is the best time to provide your accountant with your 2021/22 records.*
July 31st 2022 - second payment on account for 2021/22.*
December 31st 2022 - deadline for the tax to be paid through PAYE
January 31st 2023 - tax return deadline for 2021/22 tax return; balancing payment for 2021/22 & first payment on account for 2022/23.

* = this is a date relating to the tax year 2021/22 that has already passed as of when this blog post was written and published

If you need any more guidance or have any more questions when it comes to filing your self-assessment tax return for the tax year 2021/22 next month (as well as for future tax years), do get in touch with us for a free 30-minute consultation by calling us at 07762657277.

Can I Claim Business Expenses Without a Receipt or Invoice?

183:790115154 (Gouri Kubair) — Thu, 24 Nov 2022 16:57:56 GMT

Can I Claim Business Expenses Without a Receipt or Invoice?

The Difference Between a Receipt and an Invoice

A business receipt is a written acknowledgement of payment, received for a product or service, provided by a supplier. Receipts are not to be confused with invoices, which are legally enforceable documents used to request payment for a product or service from the buyer. Both documents are similar in that they are issued during the sales process. However, an invoice is given before the payment is received and is a payment request and acts as proof of the sale - including a breakdown of the products/services and the balance due. Meanwhile, a receipt is given after the payment has been made and acts as proof of ownership and payment - both the balance due and the amount paid for the products/services.

Why are Receipts and Invoices Needed?

HMRC generally require both receipts and invoices for various tax-related purposes. It isn't compulsory to provide either an invoice to the buyer of your product/service, both you/the business and the buyer are VAT registered. Similarly, receipts are not mandatory should the buyer of the product/service not require proof of ownership and payment. However, it is helpful and generally recommended to keep a record of both documents in order to file taxes.

The information provided on an invoice and receipt may be used to verify the legitimacy of a purchase, and claim purchases for their tax return. Specifically, tax-deductible business expenses such as insurance, software, utilities etc, can be proven with these supporting documents. It is recommended to keep an accurate record of all relevant sales invoices and receipts of up to six years - that is safe and accessible - so as to claim any business expenses from your tax return.

How Do I Claim Tax Relief Without an Invoice or Receipt?

While it is generally required to provide business invoices/receipts to file your tax return and claim expenses, there are some instances where you can claim without them.

1) You never received a receipt - if you have purchased a product related to your business online (via Facebook or Gumtree for example) or paid for the products in cash and the seller didn't or won't provide a receipt, keep a thorough record of the purchase, including what the item is, when you purchased it, the full name of the person you bought it from and how much the item cost. As long as you can satisfy HMRC by providing these details of the purchase, you should be able to claim business expenses.

2) VAT claimed on items under £25 - you should be able to claim back the VAT for small items of business expenses without any need for the receipt, so long as you are VAT registered. If you are able to calculate an estimate of how much you spent in the year, you can satisfy HMRC. Claim back VAT on business expenses without a receipt for

Car parking (not including on-street meter parking)
Phone calls (can be from public or private telephones)
Coin-operated machine purchases
Road tolls

3) Use bank statements instead of receipts - if you aren’t claiming back VAT and you paid using your business card, your bank statement can serve as proof of purchase (you cannot use this method to claim back VAT if the purchase was over £25).

4) Mileage - you can calculate motor expenses if you are a sole trader or partnership using a flat rate scheme. You can claim:

45p per mile for the first 10,000 business miles and then 25p a mile for every subsequent mile - cars and vans

24p per mile for any distance - motorcyclists

Home office expenses - if you're self-employed, you aren't required to send proof of expenses when you submit your tax return (although it is best to keep accurate proof and records to show HMRC if needed). If you're self-employed and work from home for more than 25 hours a week, you can claim a flat rate allowance (not including telephone and internet - which are not exclusively used for business purposes).
Contractors - according to HMRC, expenses that are exclusively for the purposes of your contract can be claimed. If these expenses don't have receipts but are genuine business expenses you have actually incurred, you can potentially claim these expenses too. You should, for example, be able to claim for travel expenses on a tube that you were unable to keep the ticket or obtain a receipt for as long as you can prove to HMRC that you really did make the journey, and the journey was related to your work.

Conclusion

Generally, it is recommended that you keep an accurate record of your business invoices and receipts for around six years from the end of the accounting period in order to file your tax return correctly and receive tax relief if applicable. However, there are a few instances whereby these documents are not required, so long as you are able to provide sufficient and relevant evidence and information to satisfy HMRC.

Do you run a small business and need further advice on filing your tax return, claiming business expenses without a receipt or any other tax-related queries? Do not hesitate to contact us here at Kubed Solutions for a free 30-minute consultation by calling 07762657277.

What Expenses Can You Claim For Working From Home & Being Self Employed?

183:790115154 (Gouri Kubair) — Fri, 21 Oct 2022 14:13:49 GMT

What Expenses Can I Claim for Working From Home as Self-Employed?

There has been a massive increase in individuals working from home in recent years, with the emergence of the global pandemic, a higher reliance on at-home technology, and individuals turning to self-employment. If you are self-employed - eg as a sole trader/freelancer - and work from home, you can claim tax relief known by HMRC as a ‘use home as office’ allowance, and these work-from-home related expenses have their own methods of calculating.

How Do I Calculate Tax Claims From Working From Home?

Two main methods are used to calculate tax claims if you work from home.

Simplified Method

Using the simplified method requires you to calculate your tax claims using a flat rate of your work-from-home hours, which varies depending on the number of hours you work from home each month. It is important to note that you can only this method if you work a minimum of 25 hours a month from home.

Reasonable Method

If you do not qualify for the Simplified Method (because you work for less than 25 hours a month from home, or you simply don't want to use this method), you have the option of the Reasonable Method. This method requires you to claim a proportion of your work-related expenses based on your total expenses. Specifically, you would divide your total household costs by the number of rooms used only for working from home, and/or the time you spend working from home. This can be done in three steps:

Working hours eg the type of work you do, other work locations, other employers who also work at your home

How many hours is your home used for business each day?

Working rooms

How many rooms are in your house?
How many rooms in your house do you only use for your business?
How many rooms in your house are used for both business and private use?

Work out the total costs you can claim
Add up the total costs
Divide the total costs by the number of rooms in your house
Half the number of rooms in your house used for both business and private use, then add this to the number of rooms used only for business use
Add the number you calculated in b) and the number you calculated in c) to get the total number of expenses

Example: If you have 3 rooms in your home, you use one exclusively as an office and your electricity bill for the year is £300. If every room in your home uses equal amounts of electricity, you can claim £100 (£300 divided by 3) as expenses. If you worked only two days a week from home, and you use that room all 7 days of the week, you could claim £28.57 as allowable expenses (£100 divided by 7, multiplied by 2). Please get in touch with us if would like a free template for home office use calculations.

What Home Expenses Can I Claim?

There is a wide range of fixed expenses you can claim a proportion of if you're self-employed, work from home and use the Reasonable Method, including:

Council tax
Rent/mortgage interest
Broadband/internet/phone usage
Water
Insurance

There are also variable expenses which will vary across each payment time:

Heating/gas
Electricity
Repairs/maintenance
Cleaning

If you work from home and are self-employed, make sure you correctly work out the tax expenses you can claim, using the methods specific to working from home and being self-employed - there are other ways of calculating your tax relief if you work from home for a limited company, for an employer etc, and you cannot claim work from home expenses if your employment contract lets you work from home some or all of the time, you work from home because of COVID-19, or your employer has an office, but you cannot always work there sometimes because it’s full.

If you work from home running your own small business as a sole trader, and you require any further assistance and you require further assistance on claiming your ‘use home as office’ allowance, do not hesitate to get in contact with us for a free 30-minute consultation by calling us at 07762657277.

Which VAT Scheme Is Right For My Business?

183:790115154 (Gouri Kubair) — Tue, 20 Sep 2022 13:55:27 GMT

VAT, or value-added tax (also known in some countries as a goods and services tax), is a type of tax that is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer - and then paid to HMRC. There are different ways to account for VAT in every business transaction. If you have a VAT registered business, VAT should be applied to every sale; however it is possible to reclaim VAT charged on business expenditure.

Registering for VAT: when to register, pros and cons

Once your taxable turnover exceeds the VAT registration threshold of £85,000, it is compulsory to register for VAT. It is important to check your taxable turnover and the threshold on a rolling 12-month basis (not just at the end of your accounting year) as the threshold can change from year to year. You have 30 days to register once you pass the threshold, which you can do online. Your VAT registration date is the first day of the second month after you go over the threshold, although you are able to back date your registration date to specifically suit your business.

Registering is optional if your business earns less than the VAT registration threshold, but there a couple of advantages - as well as disadvantages - to consider before deciding to register for VAT:

Advantages

You will be able to reclaim the VAT you pay on business supplies from the government when filing your VAT return
Your business will look more professional if it’s VAT registered, and can also hide the fact that your turnover is lower than the VAT threshold.

Disadvantages

You will have to charge more by adding VAT to the prices of the products/service you're selling, if they are VATAble - although you should check that your prices are competitive.
You will have to do more accounting, such as passing on the VAT you've charged to the government and submitting quarterly VAT returns ( you can seek assistance for these tasks from an accounting service such as us at Kubed Solutions ).

Which VAT Scheme Should I Use?

You will need to find a suitable system to inform the government how much VAT you have charged and paid once you have registered your business for VAT. There are four methods used to do so, one of which being the Standard VAT Scheme that most people opt for.

Standard VAT Scheme

This method requires you to keep a detailed record of every purchase and sale from your business. As of April 2022, you must use a compliant Making Tax Digital (MTD) software to keep digital records and submit your VAT returns for your registered business. Alternatively, if you use a spreadsheet to record your businesses sales and purchases, you can use a bridging tool.

You also have the option to apply for a MTD for VAT exemption if using MTD software, as well as computers or the internet, is impractical or unreasonable for your business. Ensure that you file your VAT return with HMRC and pay any VAT due - you will be able to claim a VAT refund should you find that you have paid more VAT than you have charged.

Annual Accounting VAT Scheme

There are three alternative VAT accounting schemes that can also be used, one of which being the Annual Accounting VAT Scheme. For businesses with an annual turnover lower than £1.35 million, you can report and pay your VAT annually (rather than quarterly like you would using the Standard VAT Accounting method). You can make quarterly interim payments for the VAT that you estimate you will owe once the VAT return has been completed. Some businesses prefer opting for this method because they are able to set their VAT reporting and payment deadline the same as their corporation tax filing dates which makes the process simpler. Also, this scheme allows businesses to budget more carefully and is better for cash flow as payments are spread throughout the year. However, businesses using this scheme sometimes have to apply for a refund as they've overpaid HMRC, or make a final balance payment because they’ve underpaid HMRC.

Flat Rate Scheme

The Flat Rate Scheme is another option that can be used only for small businesses with an annual turnover of up to £150,000 (you can check with HMRC to see if your business is eligible). This scheme allows you to pay a percentage of your total turnover as VAT. It is important to note that the percentage you pay is dependent on two factors: the industry of your business, as there are different flat rates for different types of businesses, and whether or not your business is a limited cost business. Choosing this scheme means you won’t be required to account for the VAT details of every purchase made within the business, although you would still have to charge VAT on invoices.

Cash Accounting Scheme

Businesses with an annual turnover higher than £1.35 million can opt for the Cash Accounting Scheme - rather than accounting for VAT on the date you send the invoice, you account for it on the day you are paid. This is a great option for those with slow payers, as you won't have to pay VAT before you've been paid. However, you won't be able to reclaim the VAT until payment has been completed, and if your business buys a lot of items on credit, this may not be the best scheme to choose. Furthermore, you will still have to complete your returns quarterly - similarly to using the Standard VAT Accounting Method.

You must ensure that you register for VAT once your business has passed the registration threshold, after which you are obliged to maintain your VAT accounting records, and do so digitally (in compliant software or a spreadsheet). It is crucial that your returns are accurate - as you may face significant fines from HMRC for failing to account for VAT correctly, and on time - as you may be heavily penalised for late filing and late payment.

You may find it useful to seek guidance for the VAT accounting of your business from an accounting service, such as us here at Kubed Solutions. We understand that there are different industries and different types of businesses that will be better suited to certain accounting schemes than others. Get in touch with us today and we can help to decide which VAT scheme is right for you and your business - you can call us now at 07762657277 for a FREE 30 minute consultation.

How Much Salary Should I Take Out Of My Business?

183:790115154 (Gouri Kubair) — Sat, 20 Aug 2022 07:13:52 GMT

How Much Salary Should I Take Out Of My Business?

How to Take a Salary from your Limited Company

If you're self-employed, you need to work out the best way to pay yourself. Taking a salary from your limited company reduces the amount of corporation tax your company pays because it counts as an allowable business expense. You can also accumulate more qualifying state pension years if your salary is over the lower earnings limit of £6,240 (for the 2022/2023 tax year).

As a director, your salary would be paid to you in the same way you'll be paid by an employer, and you can issue a dividend, whereby shareholders (the owners of the company) are paid using company profits rather than reinvesting profits back into it. However, choosing to take either a low or high salary from your limited company can influence the tax efficiency of the salary.

Taking a Low Salary

According to HMRC, individuals who don't have a contract or receive regular salary payment for their company despite holding a position for it (known as office holders) aren’t subject to National Minimum Wage regulations, unless an employment contract is put there. This means that by taking a low salary, you won't have to pay income tax or National Insurance Contributions (NICs) for that salary.

If you have a total income under £12,570, you do not have to pay Income Tax as this money is your Personal Allowance. There are also some National Insurance thresholds (all of which are lower than the Personal Allowance threshold of £12,570) that you should be aware of. These include:

The lower earnings limit: If your salary is above the lower earnings limit of £6,396, you’ll retain your state pension contribution record
National Insurance: If your salary is below the NI primary threshold of £12,570 (as of July 2022), you won't need to pay any employee’s NICs. If your salary is below the NI secondary threshold of £9,100, your limited company (as your employer) won't need to pay any employer’s NICs.

Your salary should be high enough that it surpasses the Lower Earnings Limit, but low enough that you aren't required to pay NIC. The most tax-efficient salary would therefore be £758.33 a month/£9,100 a year, though this may vary from person to person.

Taking a High Salary

Despite a low salary being the best option for tax efficiency, there are also some advantages to taking a higher salary. With a high salary, you'll be able to receive maternity benefits as you need to be employed and be compliant with national Minimum Wage regulations in order to receive it. You will also have no issues with the national minimum wage regulations if you want a contract of employment. Additionally, you'll be able to receive an annual tax-free Personal Allowance if your salary is paid above the NIC threshold (and if you have other sources of income).

Other benefits of having a high salary include having more cover under permanent health, critical illness, personal accident or similar policies where payouts are calculated based on your earnings. Furthermore, you'll be more likely to apply to meet the criteria to apply for a loan or mortgage. These benefits of taking a higher salary are important to think about, as they may be more important than the tax efficiency of taking a lower salary.

The Effect of Tax and NICs

The amount of salary you choose to take also influences and is influenced by different types of tax as well as NICs, respectively.

Salaries are subject to tax via PAYE (pay as you earn). The implications of this are that with PAYE, the additional tax paid outweighs the benefits of reducing your corporation tax liability from a higher salary.

As mentioned earlier, the NI threshold can affect how much NICs are to be paid; this differs for employees and employers.

Employees have a separate earnings threshold before NICs are due because they aren't cumulative like Income Tax, and there is a maximum limit on the amount to be paid for NICs. Employees who aren't directors have a monthly threshold set and have to pay NICs if they paid above the threshold in a month - even if they have a reduced monthly salary for the rest of the year. Conversely, directors have an annual threshold that is 52 times the weekly threshold, and NICs must be paid when the salary goes over this.

Employers have the same NIC threshold as employees. However, the employer must pay 15.05% of the salary amount that the employee earns above the weekly National Insurance earnings threshold for the current 2022/2023 tax year. This applies to the director's salary and represents another PAYE the company must pay.

So, How Much Salary Should You Take from Your Limited Company?

This ultimately depends on your other sources of income, whether you would like to qualify for a state pension or not, whether you are considering taking dividends out of your business, etc.

The company director decides the salary amount to be paid and may wish to seek guidance from a professional accountant, to ensure they are paying themselves in the most tax-efficient way.

If you need any help and advice on how much salary you should take from your limited company, do not hesitate to get in touch with us here at Kubed Solutions for a free 30-minute consultation when you call 07762657277.

Motor Expenses: Expenses Claim or Mileage Claim?

183:790115154 (Gouri Kubair) — Sat, 20 Aug 2022 07:09:35 GMT

Motor Expenses: Expenses Claim or Mileage Claim?

Did you know that you can claim motor expenses that are related to using your car for legitimate business journeys? Either the expenses claim method or mileage claim method can be used to claim motor expenses against business profits, thereby reducing the overall tax bill. But which method is best for tax? Read on to find out!

Expenses Claims vs Mileage Claims

The expenses claim method entails calculating the total motor-related costs of the vehicle - including fuel, repairs & maintenance, road tax, insurance, MOT, and parking - and deducting the percentage of costs made from personal use to get the business-related percentage of your total costs. The business-related percentage is what you can then claim back. Conversely, a mileage claim can be done by multiplying the business mileage with the government allowance of the vehicle per mile - which varies depending on the type of vehicle.

Mileage Rates

New paragraph

Be sure to not include journeys to and from work from home when recording business mileage as this does not count as a business journey, contrary to popular belief!

Claiming VAT on Motor Expenses

When it comes to claiming VAT on motor expenses, you need to be aware of the added complications this comes with. You have to use the expenses method if you are a sole trader and registered for VAT. Either method can be used by limited companies, but VAT can only be claimed on fuel if limited companies choose the mileage method. There are technical complications when claiming VAT on fuel so it is advised to seek guidance from an accountant (such as us here at Kubed Solutions!) to ensure the correct claims are being made.

Claiming Tax Relief on the Purchase of a Vehicle

If the expenses method is used, a percentage of the vehicle’s yearly purchase value can be claimed as a capital allowance. This percentage is based on the emissions and nature of the vehicle. Using the mileage method, however, means you cannot claim anything against the vehicle purchase due to depreciation being factored into the pence per mile.

For limited companies, the vehicle counts as a company car so there are extra rules that come with claiming a proportion of the vehicle value which require their own assessment. Limited companies tend to choose the mileage method and keep the vehicle in their own name. If in doubt seek guidance from an accountant on whether or not to include the vehicle as a company car.

Tips for Claiming Motor Expenses

There are some easy steps you can take to make sure you choose the right method for claiming tax on motor expenses in the future. These include:

Understanding the business journeys that apply to you;
Ensuring you are accurately recording your business mileage - regardless of what method you choose;
If you use the expenses method or your business is VAT registered, make sure you save all evidence of fuel receipts and any other relevant costs;
Being aware that the method you decide to use depends on the proportion of business mileage you do in comparison to personal mileage; and
Recording your mileage for a few months before preparing comparison calculations for the tax relief - will help you to accurately calculate both methods!

If you require any further guidance on choosing a method to use to claim back tax relief for motor expenses, or any other accounting needs, we offer free 30-minute consultations. Be sure to get in contact with us so call us on 07762657277.

Tax-Free Letting: The Rent-a-Room Scheme

183:790115154 (Gouri Kubair) — Wed, 29 Jun 2022 12:42:54 GMT

Tax-Free Letting: The Rent-a-Room Scheme

If you've been thinking about letting a room to a lodger in your accommodation, the rent-a-room scheme may be the answer for you. This scheme allows you to rent your room tax-free, but there are a few things you should know before partaking in it!

Rent a Room Criteria

You can rent a room without paying tax if:

Your lodger pays up to £7,500 a year, and this income includes everything you charge tenants as part of the rental service eg cleaning, meals, laundry etc;
The space you’re letting is fully furnished and not used for business purposes eg an office space;
You have permission from your landlord or mortgage provider to sublet the space if you rent or own your accommodation, respectively;
You have permission from your home insurance provider, regardless of if you rent or own your home; and
You keep a record of the income your lodger pays you.

If you rent or own the accommodation with another person, you can only earn £3,750 a year - £7,500 split equally between you.

Paying Tax with the Rent-a-Room Scheme

If your lodger pays more than £7,500 a year, you will have to complete a tax return. There are two ways you can choose to go about paying taxes if your income is more than £7,500

A - paying tax on your rental profits: you can opt out of the rent-a-room scheme and pay taxes on your profit aka the amount left after deducting the expenses (losses made while letting the room) from the income your lodger pays you - this is normal rental income tax; or
B - claiming rent a room relief: you can choose to take £7,500 (or £3,750 if you share your property with another person) tax-free, and then only pay tax on the excess rent amount.

Opting Out of the Rent-a-Room Scheme

If your lodger pays more than £7,500 a year on rent, it may be more cost-effective for you to opt out of the rent-a-room scheme. Whether or not it is most effective depends on if your expenses are more or less than £7,500.

If you choose to opt-out of the rent-a-room scheme, regardless of whether or not your lodger pays more or less than £7,500 a year, you need to inform HMRC by the 31st of January after the end of the tax year. You can inform them by writing to them or stating that you would like to opt out in the property section of the tax return.

It is essential to inform HMRC if your lodger pays more than £7,500 a year on rent and you would like to opt-out of the rent-a-room scheme because they will assume that you choose A and pay rental income tax. Opting for B will mean you cannot claim expenses, but will have an allowance of £7,500 tax-free, It is therefore advisable to opt for A if your expenses are higher than £7,500, and opting for B if your costs are lower than £7,500, as you will ultimately pay less tax in both of these cases.

The Rent-a-Room Scheme can be a great way to earn some extra money if you have room to spare in your accommodation. If you do decide to take part in the scheme, make sure you're fully aware of how taxing works, so you can financially get the most out of it.

If you have any queries or would like to discuss anything mentioned in this blog, feel free to contact us!

We offer a free 30-minute phone consultation - call us on 07762657277.

8 Steps to Starting a Business

Tue, 31 May 2022 13:09:02 GMT

8 Steps to Starting a Business

There are around 5.5 million small businesses in the UK, and those that succeed tend to have a great planning process (which, by the way, should start before you even launch!).

Here are 8 steps to help your new new business succeed:

1. Start your business plan.

Starting your business plan as soon as possible is the easiest way to create a roadmap for your business, helping you turn a passionate idea into a successful venture.

Include a business description, market strategy, competitive analysis, financial backing ideas, operations, and other data that you'll find useful when planning.

Think about your business plan as a “living”, ever-changing document, expand and make adjustments as you gain more knowledge, and try to answer some of these points:

Why should people care about your business and what needs does it fill?
What is its purpose? The best business can describe its purpose in one sentence.
What will be the service or product you offer?
Who will be your audience base or target customer? Be as specific as possible and describe their age, gender, income level, location and other factors.
How do you plan to develop your business' products or services, and how will you get it out there?

2. Conduct market research

By doing some market research, you'll discover if your business could survive in the real world.

Use competitive analysis - look at the competition you face and try to find out product demand, demographics, and market size. This will help you craft your market advantage.

Use a mix of resources available online, as well as conducting surveys, focus groups, and prospect interviews.

After you've conducted your market research and figured out your target audience, you will have a clearer vision when developing products and services that will appeal to them. Market research is also great for helping you decide on your business name and branding.

3. Decide on your business structure.

Once you decide on a relevant, unique business name and domain name, decide what kind of structure is best for your business, such as a sole trader, partnership, or a limited company.

It's important to carefully choose what legal structure you need for your business, as it can influence what taxes you pay, your personal liability, and the ability to get funding. It's always a good idea to consult with an accountant to help you decide.

You’ll also need to think about where your business is located and its operations, whether that’s a home office or a brick-and-mortar store.

4, Sort out your Funding

Calculate how much money you need (it's a good idea to budget one year of operation in your business plan). Using a spreadsheet or any budgeting software, include every expected expense, including overhead and marketing costs.

You can also conduct a break-even analysis, which helps find out the minimum account of money your business needs to sustain itself.

The formula for the break-even point is Fixed costs ÷ (Item price – Variable costs). Finding out your break-even point can help you determine how to price products and services, how much you have to sell to make a profit, and your overall profitability.

There are a few ways you can fund your new business. You could:

Self-fund from personal savings
Borrow from friends and family
Apply for a small business loan or grant.
Crowdfund online.
Get investment from an angel investor or venture capitalist.

5. Get your paperwork set up.

Once you've decided on your name, legal structure, and how you'll be funded, it's time to start gearing things into action! You might need to do some (if not all!) of the following:

Register with Companies House (if a Limited Company), and tell HMRC.
Open a business bank account.
Register any domain names.
Register any trademarks with the Intellectual Property Office.
Start using accounting or bookkeeping software, or work with an accountant.

6. Get the word out.

Create a website for your business, either working with a web developer or by using a do-it-yourself web creation platform. It's important to think of your online presence as a whole, so also think about the social media platforms you need to be in, and what kind of marketing you'll be using to reach your target customers.

Here are a few ways to get the word out about your new business:

Leaflet drops.
Holding a giveaway online.
Use influencer marketing.
Go to trade shows.
Online adverts on Facebook and Instagram
Online adverts on Google and Youtube.
Advertising on Google
Radio advertising
Advertising on billboards.
Get a story in your local newspaper.
Pay for advertisements in printed magazines and newspapers.

7. Plan for business growth

With all the stories about unimaginably successful companies that end up losing sales or go out of business due to unforeseen growth, it's important to plan ahead.

Think about delegating roles and responsibilities in the future, make decisions so that you're stable as your business develops, and think about the business structure you may want to achieve long-term.

Here's some other things you can do to ensure regular, and predicted growth:

Studying market trends
Testing new ideas
Acquiring another business
Growing into new markets
Expanding product lines and services

8. Get ready for your first accounts.

Whether you're a Sole Trader or a Limited Company, you'll still have to file at least one type of paperwork. For Sole Traders, this is an annual Self-Assessment Tax Return, and for Limited Companies, these are Company Accounts.

However, the thing that both have in common is that you need to be organised in your bookkeeping when recording your sales, income, expenses, and operation costs. Staying organised can help you track your budget, and save you time when filing your accounts.

You can also read our top tips here .

Most businesses have to file accounts once per accounting period, although VAT-registered companies must complete VAT returns quarterly.

Hiring an accountant is a great way to keep on top of your tax liabilities, and save you time so that you can focus on what matters in your business.

At Kubed Solutions, we're always happy to help you with the accounting needs of your new business. We offer a FREE 30-minute consultation - call us on 0776265277.

Self-Employed Tax Brackets 2022/23

183:790115154 (Gouri Kubair) — Wed, 11 May 2022 07:07:05 GMT

Self-Employed Tax Brackets 2022/23

You might be wondering if anything has changed for the new tax year of 2022/23 for self-employment? Well, there are always a couple of new UK tax brackets and some new updates to thresholds introduced each year in April. Here's a handy guide about the self-employed tax changes.

Are there changes to personal allowance for 2022/23?

Your personal allowance for 2022/23 will remain at £12,570. This is how much you can earn tax-free.

The government has stopped this tax allowance from changing until 2026, meaning UK taxpayers and businesses will have to pay more tax if earnings rise.

What are the UK tax brackets for the self-employed 2022/23?

The income tax rates and thresholds for self-employed people have remained the same in 2022/23 as 2021/22:

Basic Rate – 20% on income between £12,571 and £50,270 – you pay tax on £37,700.
Higher Rate – 40% on income between £50,271 and £150,000
Additional rate – 45% on income above £150,000

Need more guidance about filing Self-Assessments? Click here .

Has National Insurance gone up this year for the self-employed?

Yes, the government has increased the National Insurance tax rates for 2022/23 by 1.25%, in a bid to help pay for the costs of the coronavirus response. Although the rise is temporary and will eventually be replaced next year by the Health and Social Care Levy, the levy also stands at 1.25%.

The self-employed pay their National Insurance through their annual Self Assessment tax return, usually both Class 2 and Class 4, and those with staff also need to pay the National Insurance Contributions of employees via payroll.

It has also been announced that the thresholds for National Insurance will be increased from July 2022 onwards, meaning people can earn more before paying National Insurance.

What are the tax thresholds for Class 2 NICs and Class 4 NICs?

2022/23 Tax thresholds

No National Insurance incurred between £0 to £6,724
Small profits threshold for Class 2 NICs: £6,725
Lower profits limit for Class 4 NICs: £9,880 (increasing July 2022)
Upper profits limit: £50,270

The National Insurance rates:

Class 2 NICs: £3.15 per week

Class 4 NICs up to the upper profits limit: 10.25%

Class 4 NICs are above the upper profits limit: 3.25%

Class 1 - Employer & employee National Insurance contributions

If you also have income from employment, or are an employer, these are the National Insurance tax thresholds for Class 1:

Tax thresholds for Class 1 (primary) National Insurance:

Lower earnings limit: £123 per week, or £6,396 annually.
Primary threshold: £190 per week, or £9,880 annually (increasing July 2022).
Upper earnings limit: £967 weekly, or £50,270 annually.

National Insurance Contributions stand at 13.25% in 2022/23 for earnings above the primary threshold. For earnings above the upper earnings limit, this is 3.25%.

Tax thresholds for Class 1 (secondary) National Insurance

Employee NICs are due above a certain threshold, which is £9,100 (or £175 per week) in 2022/23, increasing from £8,840 in 2021/22.

National Insurance is also due at this rate on any work benefits you give employees.

NEW wage rates for employers(from April 2022)

National living wage: £9.50
Rate for 21-22 year olds: £9.18
Rate for 18-20 year olds: £6.83
Rate for 16-17 year olds: £4.81
Apprentice rate: £4.81

What are the tax rates for dividends in 2022/23?

As well as the increase of National Insurance rates, the tax rate for dividends is also rising by 1.25%.

You’ll pay dividend tax on the dividends you earn above £2,000 (the dividend allowance) at the following rates:

Basic rate taxpayers – 8.75 per cent (up from 7.5 per cent).
Higher rate taxpayers – 33.75 per cent (up from 32.5 per cent).
Additional rate taxpayers – 39.35 per cent (up from 38.1 per cent).

You can read more about dividends and learn if salary or dividends is better for you by clicking here .

Making Tax Digital extended to all VAT-registered businesses

In place for VAT-registered businesses with a taxable turnover of more than £85,000 since 2019, the Making Tax Digital system begins its next phase.

From now on, all VAT-registered businesses must keep digital records and file VAT returns digitally using relevant accounting software.

Ultimately, all taxpayers will be required to use Making Tax Digital, although it won’t be made compulsory for Self Assessment returns until at least 2025.

More time to understand points-based tax penalties

A new tax-penalty system based on points has been delayed until January 2023, from its initial implementation date of April 2022.

Although it was meant to be launching last April alongside the rollout of Making Tax Digital to all VAT-registered businesses, it's been postponed as HMRC’s systems weren't ready.

This gives businesses more time to learn more & prepare for the changes.

The new Plastic Tax has come into force.

A new packaging tax has come into force in April for those who, as part of their business, import or manufacture plastic packaging, although it won't apply to every business who uses plastic.

According to the gov.uk website, it only applies “if you’ve manufactured or imported 10 or more tonnes of finished plastic packaging components within the last 12 months, or will do so in the next 30 days.”

Those who meet either of those thresholds have to register for the tax.

Business rates discount

Although many businesses now face the uncertainty of tax increases and rising costs, there is some good news; businesses in the retail, hospitality and leisure industries will get a 50% discount on their business rates, with a maximum of £110,000 per business.

This discount should be automatically administered by local authorities.

As well as this new business rate discount, an increase in business rate multipliers has been paused for 2022/23.

Additional UK tax information for 2022/23

The capital gains tax allowance stays at £12,300 for individuals, and £6,150 for trusts - the rates will also remain the same.
Corporation tax stays at 19 per cent, although it will increase in 2023 for larger businesses.
Other allowances remain the same, including the dividend tax allowance at £2000, the Individual Savings Account (ISA) allowance at £20,000, and there's no changes to tax on savings interest
Fuel duty has been reduced by 5p per litre.
As announced in the Spring Statement, Employment Allowance has increased from £4,000 to £5,000.

If you have any queries or would like to discuss anything mentioned in this blog, feel free to contact us !

We offer a free 30-minute phone consultation - call us on 07762657277.

The Importance Of Tax Planning

183:790115154 (Gouri Kubair) — Tue, 03 May 2022 13:16:03 GMT

The Importance Of Tax Planning

It's a good idea to plan ahead when dealing with tax - especially when it comes to VAT and corporate tax planning.

By starting to plan tax as soon as possible, you can save you time, money, and an enormous amount of stress - sorting everything out last minute is never a good idea!

What is tax planning, and why is it important?

Tax planning helps you minimise what tax you pay. By taking full advantage of any exemptions, deductions, allowances, and exclusions, you can also achieve your financial goals easier.

Some benefits of a good tax plan are:

Reduced tax rates and bills.
Better control over payments and timings.
Full usage of tax credits.
Tax relief legislation advantages.

Tax regulations are always changing, so don't forget to frequently review your strategy to adjust your plan as necessary.

Your business structure

Your business structure will impact both your tax liabilities and the allowances you’re eligible for.

You're considered self-employed for tax purposes if you are set up as a sole trader or partnership, and you'll need to complete an annual Self Assessment return for HMRC.

Limited Companies have different tax requirements, such as Corporation Tax, and possibly VAT.

It can be helpful to speak to an accountant before starting a new business to help you consider the pros and cons of each legal structure.

Key Tax Planning Considerations

Here are key considerations for tax planning that you should know about.

Corporation tax

Planning for Corporation Tax can include thinking about deferring income or profit to reduce your tax bill as much as possible. You could also bring costs forward to a different accounting period or take full advantage of capital allowances.

The Government has launched a new 130% Super Tax Deduction for companies investing in qualifying new plant and machinery assets between 1st of April 2021 and the 31st of March 2023! You can read all about it in our blog here .

Capital gains tax

Buying and selling assets is normal in business - but this means you'll need to plan for capital gains tax, especially if you work within real estate. You can know which assets are exempt and avoid a surprise bill by planning tax ahead.

Dividend Planning

Business owners - don't forget to look at personal tax planning.

Although dividend planning won't help with company tax plans (as dividends are taken post-tax), it will be beneficial for your personal earnings.

If you're a shareholding director of a Limited Company and are expecting the business to make a considerable profit, it could be a good idea to withdraw a larger dividend, as it can help minimise your taxable income.

If you’d like to find out if dividends or salary is the best option for you, we have a useful blog here .

International Tax

International tax planning is important as more and more business venture overseas and deal in international markets. One of the things to avoid is double taxation by using foreign tax credits to the fullest extent and timing your tax bills to your benefit.

VAT

A business must register for (and pay) VAT if its turnover is £85,000 or more. VAT, also known as Value Added Tax, offers certain benefits and you can register voluntarily if it suits your business.

VAT-registered businesses must charge VAT on goods or services, but can also reclaim VAT on business-related purchases. Currently, the standard VAT rate is 20 percent, although some products and services have a lower rate of VAT, or are fully exempt.

The good thing about becoming VAT-registered is that you can reclaim up to four years of VAT on products or services you bought before the date of your registration!

Those registered have to report to HMRC every three months the amount of VAT they have charged or paid via a VAT return. This must be done even if there’s no VAT to report.

Considering your business structure, timing expenses, and understanding the various types of tax your business is required to pay are key elements to tax planning. Speaking with a qualified accountant can help you uncover ways to reduce your tax liability and save money now and well into the future. You can get in touch here .

Have any questions or need any help? We can help!

Here at Kubed Solutions we offer a FREE 30-minute consultation to help you with your tax compliance and accounting needs.

What is better, salary or dividends?

183:790115154 (Gouri Kubair) — Tue, 05 Apr 2022 08:17:58 GMT

What is better, salary or dividends?

You might be wondering: What is the most tax-efficient way for company directors to take income out of a company?

If you run a company, even if you're the only employee, you might wonder which option is best for you. Here are the two different ways that you can choose to pay yourself: Salary or Dividends.

How should I take income out of my company?

The majority of limited company directors pay themselves with a mix of salary and dividends. Finding the right combination for you will depend on different factors, such as:

The business’s profits.
Whether you want to keep the benefits received from the Government (e.g. maternity benefits or state pension).
The amount you want to reduce your personal tax bill by.
The amount you want to reduce the company's tax bill by.

What are the benefits of taking a salary?

If you're a company director, it’s always a good idea to take out a salary as you'll be on your company's payroll. The benefits are:

You’ll be adding to the amount of qualifying years for a state pension.
You’ll be able to make higher personal pension contributions.
You’ll be able to keep maternity or paternity benefits.
It will probably be easier to apply for insurance and mortgages.
You’ll be able to reduce the amount your company pays for corporation tax - salary is an allowable business expense.
If your business makes no profit, you can still take a salary.

What are the cons of taking a salary?

There are quite a few drawbacks to taking out a salary, however here are the largest ones:

Taking a salary means that both you and the company may have to pay National Insurance contributions (NICs).
A salary also attracts higher rates of income tax than a dividend does for the director.

How much salary can I take?

Until you pass the personal allowance threshold (currently at £12,570 in the 2022/23 tax year), you don’t pay income tax on your earnings. You will, however, have to pay NICs if your income passes the NIC Primary Threshold (currently £9,568 per year).

But be aware that your salary must be at or over the NIC Lower Earnings Limit (currently £6,240 per year) to build up qualifying years for the state pension. To keep their state pension but avoid paying NICs, some directors set their salaries between the Lower Earnings Limit and the Primary Threshold.

So, what are dividends?

It's usually more tax-efficient for a director's income to come from dividends, and it's a popular option.

A dividend is a share of the company’s profits (which is what's leftover after having settled all expenses, including taxes). However, if there's no profit, there are no dividends that can be paid.

Dividends are paid to directors and shareholders based on the percentage of shares they hold, but there's no requirement to pay all or any profits as dividends, as a company can retain its profits over various years, distributed as the board decides.

What are the advantages of taking dividends?

You can reduce your income tax bill significantly by taking most of your earnings as dividends, and there are some other benefits:

Dividends draw lower income tax rates than salary.
You don't have to pay NICs on dividends (neither for employers nor employees).

What is the dividend allowance:

In addition to your personal allowance, you also have a tax-free dividend allowance. In this 2022/23 tax year, the allowance stands at £2,000. This figure is over and above your Personal Tax- Free Allowance of £12,570 in the 2021/22 tax year.

Dividends attract a much lower rate of income tax than salary does. There is also a slightly greater tax-free allowance when you are paid in dividends.

Are there any cons to taking dividends?

Taking your income mostly from dividends may seem a great idea, but there are some limitations and catches that you need to know - here's some of them:

Income can become unpredictable if relying on dividends too much, as dividends can only be paid from company profits - no profit, no pay.
Dividends are paid after the deduction of corporation tax, whereas a salary is an expense that's tax-deductible.
If by mistake, you took out dividends that weren't covered by company profits, you will have instead taken out a director's loan, which has to be repaid.
They also don't count as relevant UK earnings for tax relief on pension contributions.

If you intend to depend on dividends for either some or the majority of your income, ensure you have a stringent process in place when it comes to accounting - report profits and account for dividends in plenty of time.

Your accountant could also be able to help you when it comes to working out which payment method is most tax-efficient for both your company and you.

Need any help understanding the best way forward for your company? Feel free to give us a call on 07762657277 , we offer a free 30-minute consultation! Or you can always email us at contact@kubedsolutions.com

Accounting & Bookkeeping Tips for Small Businesses

183:790115154 (Gouri Kubair) — Mon, 14 Mar 2022 07:53:00 GMT

Accounting & Bookkeeping Tips for Small Businesses

Accounting can sometimes seem daunting, but here are some small business accounting tips that you might find useful:

1) Keep Your Personal And Business Finances Separate:

Rather than mixing both your personal and business income in your personal bank account, have a dedicated business bank account to make sure that you can record and find income and expenses in a more organised way.

Business bank accounts offer several advantages over personal ones, including:

Making it easier to track and substantiate business expenses to take advantage of tax deductions. Offering personal liability protection by keeping business funds separate from personal funds.
By having a business account you’ll stay more organised and you won’t have to waste time shuffling through transactions!

2) Keep All of Your Receipts.

Keep every business-related receipt or invoice to claim as business expenses, and file them in your records. If you’re working from home, you can also claim back some domestic bills.

3) Have Tidy Records.

Try to keep your books in good shape so you’re not wasting time searching through them. You'll be glad that you took the time to make sure your records were organised when those tax deadlines loom.

4) Remember Tax Deadlines.

An imminent tax deadline can be quite stressful, especially if you’re rushing because you've forgotten. Make sure you set up a reminder ahead of the tax deadline so that you have enough time to actually complete those returns without mistakes.

Set up a reminder on your phone, or write it in your work diary.

5) Allocate funds for Tax

If you have made a profit, you'll need to hand some of it to the taxman. It's a good idea to set part of your income aside so that you can easily pay off your tax bill, enabling you to enjoy or re-invest your profit without worry.

6) Communicate change in circumstace with HMRC.

If you become self employed, tell HMRC so that you'll be able to complete your annual Self Assessment tax return (unless your turnover is under the trading allowance of £1,000 or are exempt).

7) Use an accountant.

Some business owners can be reluctant to take on board an accountant. However seeking the advice, guidance and expertise of a small business accountant can be crucial to making your business thrive in the future. Some small businesses are likely to work with a tighter budget and are less willing to pay for additional services. But realistically, the assistance of an accountant can save you money in the long run.

You can read all about the benefits of outsourcing on our blog here.

8) HMRC offer free workshops.

HMRC offers some services for free to help educate businesses. You can find out if there’s a workshop being held in your area or online, and tag along. However, they also offer e-learning tutorials so that you gain some more knowledge on aspects that relate to you.

They can help you learn about VAT, setting up a limited company, online filing and much more. HMRC has frequent workshops going on and you might just find something useful to you which can be a massive help in running your business.

9) Get Accountancy Training.

It's a great idea to get training in basic accountancy so that you can manage most of your accounting yourself. Here at Kubed Solutions, we love to work with people to help them manage their accounting. We can train you or your staff on Bookkeeping, Double Entry, VAT, using cloud-based accounting software, and more!

Feel free to speak to us about your accountancy or training needs - we offer a free 30-minute phone consultation!

The 130% Super Tax Deduction

183:790115154 (Gouri Kubair) — Thu, 24 Feb 2022 09:20:06 GMT

The 130% Super Tax Deduction

A new super-deduction allowance has been launched by the government, which some call the most attractive tax incentive for business investment ever offered.

The new 130% “Super-deduction” means that companies investing in qualifying new plant and machinery assets between 1st of April 2021 and the 31st of March 2023, will be able to claim:

A 130% super-deduction capital allowance on qualifying plant and machinery investments.
A 50% first-year allowance for qualifying special rate assets.

The super-deduction scheme enables companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the world’s most competitive.

But why are they introducing the super deduction?

The government has offered huge support to businesses during the Covid pandemic, as the related economic shortages and uncertainty have chilled business investment. This super-deduction has been developed to encourage firms to invest in productivity-enhancing plant and machinery assets that will help them grow.

Since the Covid-19 pandemic, existing low levels of business investment have fallen, with a reduction of 11.6% between Q3 2019 and Q3 2020, meaning companies are no longer willing to or simply can’t invest in assets that will help their company grow. They are hoping that this super deduction scheme will encourage businesses to stimulate investment. As a result, these measures can promote economic growth and counter business cycles.

This should improve the country’s productivity levels over the next two years.

What is plant and machinery?

Most tangible capital assets used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances.

The kinds of assets which may qualify for either the super-deduction or the 50% FYA include, but are not limited to :

Computer equipment and servers
Solar panels
Tractors, lorries, vans
Ladders, drills, cranes
Office chairs and desks
Refrigeration units
Electrical vehicle charger points
Compressors

Please bear in mind that certain expenditures are excluded, for example, the acquisition of company cars, as well as the purchase of second-hand plant and machinery.

Do I qualify?

Your business is eligible if you spend money on any of the assets between April 1st 2021 and March 31st 2023.

The following general conditions must all be met for expenditure to qualify for the super-deduction or the SR allowance:

it is incurred on or after 1 April 2021 but before 1 April 2023
it is incurred by a company within the charge to corporation tax
the plant or machinery is unused and not second-hand

The super-deduction and the SR allowance don’t apply to partnerships or individuals. You need to have a company to get these valuable reliefs.

So, how does it work?

How does it work? Let’s look at the 130% first-year relief on qualifying main rate plant and machinery investments made during this period. Here’s an example:

Let’s say your business spends £100,000 on main rate equipment and you’re eligible to claim the super-deduction tax break on this expenditure.

When you calculate your taxable profits, your corporate tax deduction will be £130,000 (i.e. 130% of your initial investment). Deducting £130,000 from your taxable profits will save your business up to 19% of that; 19% of £130,000 is £24,700. And that’s how much corporation tax you save if you qualify for super-deduction.

From an accounting perspective, we would advise businesses looking to maximise their tax savings to plan well ahead.

Need some advice? Call us on 07762657277 or email us at contact@kubedsolutions.com

Cutting costs in 2022

183:790115154 (Gouri Kubair) — Mon, 14 Feb 2022 13:16:53 GMT

Cutting costs in 2022

When cutting costs, ask yourself if all your business expenses are necessary and look at possible alternatives. The best way to do this is by looking at your Profit & Loss every month to make sure your budget is in line with your spending. That way, you can determine what costs to cut if needed.

It’s important to budget to make sure you know what you can spend. Your expenses will likely end up being a mix of fixed overhead costs (such as rent) along with variable costs (such as stock), and can be very straightforward. However, be prepared to make changes if your plans and circumstances change.

It’s also a good idea to do some forecasting to determine what your expected sales could be. You can do this by taking into account the sales figures of previous periods, customer demand changes, new competition entering the market, as well as your own marketing plan.

Now that you know a little bit more about the importance of Budgeting & Forecasting, here’s some tips for cutting costs in 2022:

1) Opt for energy-saving options

Switching to energy-efficient light bulbs, such as LED options, can help reduce usage and waste, and they also last longer. Making sure to turn off equipment and lights when they are not being used (or opting for occupancy sensors and timers) can also help with those energy bills!

2) Reduce office space

If your business can work remotely, you can cut down the amount of office space needed. You could also use a shared workspace, which is usually cheaper than an independent property.

Going paperless can also help you reduce ink and paper costs, as well as save shelf and storage space.

3) Review service agreements regularly

If your business doesn't handle many calls, a VOIP (Voice Over Internet Protocol) phone can help reduce costs whilst still having a UK landline number.

If your business doesn't take many card payments, then you might be wasting money on expensive credit card terminal agreements, as processing fees can be very expensive.. Make sure you're only using the payment options your business needs, and where possible, opt for cheaper card machines that still give you that flexibility you need.

You can also cancel any unnecessary subscriptions that you're not actively using, and compare the services you choose for the best deal.

4) Save water (and money)

Other than switching to cheaper suppliers, better habits can help cut costs by reducing usage. Turn off taps when not in use, check for leaks if you suspect one, and install a cistern in toilets to reduce usage when flushing.

5) Reconsider your employee perks

If employees aren’t fully using the benefits you offer, it makes sense to eliminate these and use the budget elsewhere, as reducing employee perks can save money without reducing the quality of your goods or services.

If feasible, replace perks instead of completely getting rid of them - a bonus day off or work-from-home day are cost-friendly incentives. You can also reduce the scope of the perks. For example, instead of a staff lunch, you could have a coffee morning instead.

6) Outsource processes

To reduce staff costs, you could choose to outsource operations instead. For example, many businesses will outsource their accounting instead of paying a salary to an in-house accountant, and work with a marketing agency instead of having a full-time marketer.

Outsourcing can be much cheaper than paying a wage to full-time employees, and it can still yield reliable results.

If you are looking to outsource your bookkeeping, get in touch! We offer a free 30-minute phone consultation. You can call us on: 07762657277.

Filing your self-assessment tax returns

Wed, 22 Dec 2021 12:49:37 GMT

Filing your Self-Assessment tax returns

Those self-employed or those earning income from sources other than salary are required to complete a self-assessment tax return for each tax year. The 2020/2021 Self-assessment tax return is due on the 31st of January 2022. However, you will need to submit your return by 30 December 2021 if you want more choice over how you pay your tax bill. It should also be noted that the tax is not required to be paid in a lump sum. The reason for submitting as soon as possible is that alternative payment options have stricter deadlines. For example, you would have to submit your tax return by the 30th of December if you want the option to pay with your PAYE tax code.

In order to complete a Self-Assessment tax return we require the following information:

Salary

For your employment held during the tax year, either a P60 or a P45 is required.

A P60 is given to employees at the end of the tax year. It describes their income as well as tax deductions for the year.

A P45 is given to employees who leave their employment during a tax year. Like the P60, it contains their total income and tax deductions.

P11D is also required for any benefits you may have received during the tax year.

Rental income

Please provide us with the annual rental income statement and expenses including any interest on a mortgage, paid for the year.

Bank Interest

The bank should give you a statement on how much interest you gained for each bank account.

Dividends

Dividend vouchers from personal investments are required for the tax year. Or a statement from your investment manager with these details would also suffice.

Pension Received

HMRC should send a letter annually regarding state pensions, this or equivalent bank statements are required. For Private pensions, a P60 is needed.

Pension Contributions

Tax relief may be available if you contribute to a personal pension scheme. You would need to provide: The name of the provider, The contract/membership number, and the amounts and dates of the contributions

Additionally, there are two types of arrangements where your company makes pension payments on your behalf. These are After-tax contributions and Before-tax contributions.

Capital Gains Tax

This includes gains made on the sale of shares or other assets. We require a full breakdown of purchase and sale prices and dates to calculate the loss or gains made in the year.

Foreign income

We require your worldwide income if you are a UK resident. It would be also good to understand the location of your domicile to determine further taxability of the income.

Any other income

If you earn any other income not covered above, then please let us know so we can determine if it needs to be included on your tax return.

Job Expenses

You are able to claim additional tax relief if you, personally, pay for business expenses. These expenses can include Mileage, Uniform Allowance, and Professional subscriptions.

SEIS/EIS

If you have invested with EIS you may be able to receive tax relief. HMRC should issue a certificate regarding these investments, which you will need to pass on to us.

Charitable Giving

You may be able to claim additional tax relief if you have made a charitable donation. However, this is dependent on many different factors, including Charity, size of the donation, and what rate of taxpayer you are.

Change of Circumstances

These include a Name change, Marital status change, dependents number change, or address change.

Tax Code

Tax coding notices from over the year are required.

Marriage Allowance

If you earn between £12,500 - £50,000 and your spouse earns less than £12,500, then you may be able to claim additional tax relief, you and your partner’s National Insurance numbers are required as well as a Marriage Certificate.

The above should not be taken as a comprehensive list, every individual will have a unique situation, especially in these times. Please contact us for a free 30-minute consultation.

The end of year Stocktake

Wed, 22 Dec 2021 12:42:00 GMT

The end of year Stocktake

As the beginning of a new year approaches, it becomes an appropriate time for a business to conduct an annual stock take. This is especially for businesses who work with non-perishable and inexpensive goods, as they are more susceptible to stock errors than other goods. Despite this, all businesses could benefit from an annual stock take.

Why should I dedicate time to a stocktake?

Many businesses may be hesitant to conduct a physical stocktake, given the investment of work hours you and your staff would undertake. While it is advisable to use technology to aid with keeping stock, many circumstances can cause the digital number from being different from the real number. These issues can range from minor human errors to major supply chain problems. The earlier these errors are spotted the easier they will be to amend.

How can I perform a stock take in the best way?

While at first appearance stock-taking is nothing more than physically counting items, there are many methods to make stock-taking more efficient as well as a more valuable use of your time. Firstly, this is the perfect time to create or otherwise modernise your categorisation system. How to best categorise your goods will depend on what kind of goods they are, though it is almost always appropriate to categorise your product via the price of goods or the conditions in which the goods are stored. Secondly, use this opportunity to briefly examine your goods and make sure they are still fit for your purpose, and if not, to be removed from your stock and deducted from your data. Lastly, you must compare the results of your stocktake and compare with your records, and investigate any discrepancies.

After comparing the results of your annual stocktake to your digital records, you may find that there are differences in the digital number and the stocktake results. The first course of action should be to perform a recount if the discrepancy is relatively small, preferably done by an individual who did not perform the first count. Human error is a factor of every business. If the discrepancy still remains, it must be investigated and fixed as a matter of urgency. The source of the discrepancy could be anything, but the best way to find the source is to retrace the steps of the goods to find possibilities where a discrepancy may occur.

To conclude, all businesses, especially smaller and growing businesses should participate in a stock check at least annually. Alternatively, smaller stock checks can be performed monthly. But it may be more efficient to dedicate some time every year to perform a comprehensive stocktake.

If you require additional advice or want greater clarity for your unique situation, Kubed Solutions offers a free 30-minute consultation.

Key dates for accounting

Mon, 20 Dec 2021 07:46:29 GMT

Key accounting dates

Managing deadlines is a valued trait for any business owner and is an important part of your accountancy. A business regardless of size is required to comply with several financial obligations required by the Government, these can change the type of business.

End of the Quarter…

VAT Returns are required by HMRC at the end of every financial quarter and are likely to appear very different from quarter to quarter. In a Post-Covid world, we are likely to see significant VAT rate changes compared to 2019 and before, not remaining updated to these changes can prove problematic for any business. Additionally, the business must account for how much VAT they owe or VAT they can reclaim. These factors can make filing quarterly VAT reports challenging for someone who is inexperienced in accounting.

End of the Year...

Businesses must pay Corporation Tax at the end of each Fiscal year. This requires accurate accounting records kept throughout the year as Corporation Tax is not worked out by HMRC but by the business themselves. Incorrect or delayed tax payments can lead to devastating fines for the business. While not all businesses are required to pay Corporation tax, those that don’t are likely to pay a Self-assessment Tax.

It should also be noted that these Fiscal duties will occur and will need to be done in conjunction with others. An example of this would be while Corporation Tax has to be done annually, it will likely coincide and be affected by the quarterly VAT returns as well as the monthly Payroll.

Here are some specific dates that are coming up that may be useful for your business:

Self Assessment tax return deadline The first payment on account deadline Beginning of the New tax year! New budget changes come into effect today. This year’s first quarterly VAT return filing deadline Deadline for issuing any employees with their annual P60s Deadline for filing P11D(b) and issuing P11Ds to any employees Deadline for paying Class 1A NIC Second payment on account deadline This year’s second quarterly VAT filing deadline This year’s third quarterly VAT return filing deadline Deadline for filing your company’s annual accounts if your company’s year-end is 31st March

Date	Event
31 December 2021	deadline for the tax to be paid through PAYE
1 January 2022	Corporation Tax payment deadline for 31 March year-end
31 January 2022	Self Assessment tax return deadline
31 January 2022	The first payment on account deadline
6 April 2022	Beginning of the New tax year! New budget changes come into effect today.
7 May 2022	This year’s first quarterly VAT return filing deadline
31 May 2022	Deadline for issuing any employees with their annual P60s
6 July 2022	Deadline for filing P11D(b) and issuing P11Ds to any employees
22 July 2022	Deadline for paying Class 1A NIC
31 July 2022	Second payment on account deadline
7 August 2022	This year’s second quarterly VAT filing deadline
7 November 2022	This year’s third quarterly VAT return filing deadline
31 December 2022	Deadline for filing your company’s annual accounts if your company’s year-end is 31st March

Please note, this is not a comprehensive list and your business may be subject to other deadlines. For a unique insight into your business, Kubed Solutions offers a free 30-minute consultation, for more information, visit www.kubedsolutions.com

Monthly Bank Reconciliations

Tue, 07 Dec 2021 06:29:03 GMT

What are bank reconciliations?

A bank reconciliation is checking that your business’ spending is equal to the amount leaving your bank account at the end of a fiscal period. This should be done at the end of each month but could be done more or less frequently depending on the size of the business.

How to do a bank reconciliation?

To perform a bank reconciliation you need to acquire a bank statement as well as your business’ finance records, make sure you are examining the same financial period on both records. The simplest way to determine whether your financial records are accurate is by comparing the opening and closing balance on both records. The opening balance is the amount of money at the start of the financial period and the closing balance is the amount at the end of the financial period. If both opening balances and closing balances match then you can be confident your financial records are accurate. However, the most effective way to make sure your financial records are accurate is not only to compare but to justify each expense. Justifying bank transactions is providing a valid reason for each individual expense. Once each transaction is compared to the bank statement and is given a justification, you can confirm that your financial affairs are in order.

How does your business benefit from Bank Reconciliations?

Performing consistent bank reconciliations can help a business run more efficiently by making sure all your money is being spent effectively. Bank reconciliation can help identify financial errors, which can cause problems for your business. A consistent bank reconciliation schedule can spot out and eventually prevent three main forms of financial errors:

Bank errors

These often occur in the form of removing or adding funds incorrectly. These are comparatively rare and are often sorted by the bank within a few days

Fraud/ Theft

It becomes incredibly difficult for untrustworthy parties to remove funds from your account without you knowing when you perform a consistent bank reconciliation

Double/ Missed payments

These are arguably the most common form of financial errors that performing a bank reconciliation can help prevent. These are most often caused by human error and the earlier they are noticed, the easier it is to fix.

Do you need help with your monthly bank reconciliation, contact +44 (0) 7762657277 for a free thirty-minute consultation?

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Key dates for accounting

Key accounting dates

End of the Quarter…

End of the Year...

Here are some specific dates that are coming up that may be useful for your business:

Monthly Bank Reconciliations

What are bank reconciliations?

How to do a bank reconciliation?

How does your business benefit from Bank Reconciliations?

Bank errors

Fraud/ Theft

Double/ Missed payments

When should you start outsourcing your bookkeeping?

﻿ When should you start outsourcing your bookkeeping?

Having a lot of employees

Spending too much time on Accounting…

General productivity is decreasing...

When should you start outsourcing your bookkeeping?