Blog

Government summer savings spree adds complexity to VAT for hospitality and tourism

Accountants Essex Blog, Business News, Newswire
Government summer savings spree adds complexity to VAT for hospitality and tourism

When Rachel Reeves announced a temporary cut in VAT from 20 per cent to five per cent for family attractions and children’s dining over the summer holidays, the hospitality and leisure sectors broadly welcomed it.

The scheme runs from 25 June to 1 September and is funded, according to the Treasury, by closing a tax loophole used by oil and gas companies with overseas operations.

On the surface, this looks like good news worth welcoming.

However, for the businesses applying the new rules, the reality of delivering the rate cut is more complicated than the headlines suggest.

The rules shift from one service to the next

How the cut works depends heavily on what is being sold. Admission tickets to amusement parks, water parks, zoos, museums, soft play and similar venues qualify, as do children’s and family tickets to cinemas, theatres and concerts. However, pay-per-ride attractions do not.

Children’s meals only qualify when served from a clearly marketed, separate children’s menu.

A smaller portion of an adult dish does not count, nor does a discounted adult meal or a takeaway. Season tickets and annual passes are generally excluded too.

The result is that many businesses will apply two VAT rates at once on the same bill.

Tills, accounting systems and front-of-house staff all need to handle that from day one, then revert again from 1 September.

This adds an additional layer of complexity to VAT reporting that businesses need to consider right away.

Encouraged, but not required

The Government has urged businesses to pass the saving on to customers and the Competition and Markets Authority has new anti-profiteering powers to prevent unethical activity.

Even so, there is no legal obligation to lower prices at the till and many businesses will weigh up rebuilding margin, reinvesting and matching competitors before deciding exactly what savings to offer to consumers.

Given the wider cost challenges that businesses currently face, the scheme may not deliver the lift at the till that many customers are expecting.

Right idea, wrong season?

There is also a question of timing. The scheme targets the period when families already spend most on days out and when operators are near capacity.

A cut would arguably do more for businesses in the quieter autumn and winter months. As designed, it looks more like household support than business stimulus.

Any support for the sector is welcome, provided businesses seek the expert guidance required to manage obligations and make the most of any new opportunities.

If you would like to discuss what the temporary VAT cut means for your business, please get in touch with our team.

Classic cars, jewellery and handbags – How high luxury is accounted for in Inheritance Tax

Accountants Essex Blog, Business News, Newswire
Classic cars, jewellery and handbags – How high luxury is accounted for in Inheritance Tax

Inheritance Tax (IHT) is paid on all items of your estate after you pass away if you exceed certain thresholds.

Whilst many people focus on their savings, properties and investments, the items you own, commonly referred to as personal chattels, are also included in the calculation of the estate’s value.

There has been a growing trend in recent years for people to invest in luxury goods, including cars, watches, jewellery and handbags, instead of or alongside more mainstream forms of investments, like stocks and shares.

However, many may not realise the impact that this has on their own estate, especially if the value of these assets increases significantly.

What is Inheritance Tax?

Often referred to as a “death tax” by the press, IHT is a tax on the estate, money, property and possessions of someone who has passed away.

In the UK, the standard tax-free threshold, known as the Nil-Rate Band (NRB), provides each individual with £325,000 of IHT-free assets.

On top of this, homeowners benefit from the Residence Nil-Rate Band (RNRB), which is a further £175,000 allowance if you leave your main home to a direct descendant, such as a child or grandchild.

Subject to other tax reliefs, such as Business Property Relief or Agricultural Property Relief, everything above these thresholds is taxed at a rate of 40 per cent.

A spouse can transfer any unused NRB or RNRB to the surviving spouse, which means a couple can pass on up to £1 million tax-free under the right circumstances.

As mentioned, all assets in the estate are included in your IHT calculations. This includes any classic cars, jewellery and handbags.

Unlike Capital Gains Tax, there is no general low-value exemption for personal chattels under IHT, so even modest items can form part of the estate’s overall value.

Are there ways to protect my luxury collections from Inheritance Tax?

There is a possibility that IHT could be waived on luxury collections if you are willing to part with them at least seven years before you die, thanks to the seven-year gifting rule.

This means providing clear evidence that the asset was passed on. Whilst you may be able to admire your collection from afar, you won’t be able to continue to personally possess it.

Gifted assets must be kept with the individual to whom they were gifted, as holding onto them causes them to be known as a gift with reservation of benefit and does not limit IHT exposure.

In some circumstances, you can pay a market-rate rent to use the items after making the gift, though this must be regularly reviewed to remain at market value. This approach requires careful consideration and advice.

Seeking expert support is always wise when planning your estate, regardless of how you intend to reduce IHT exposure.

Planning ahead is one of the best ways to mitigate against large IHT bills. If you have any questions about estate planning and Inheritance tax, get in touch today.

HMRC raise mileage rates and allowances

Accountants Essex Blog, Business News, Newswire
HMRC raise mileage rates and allowances

Chancellor Rachel Reeves announced an increase in HMRC’s approved mileage rates for cars and vans from April 2026 for the first time since 2011 in a speech to the House of Commons in May.

This news comes as a surprise to many businesses, as a review of the Approved Mileage Allowance Payment (AMAP) rate hadn’t been tabled.

What changes have been made to the Approved Mileage Allowance Payment rate?

The announcement of a higher 55p per mile rate for cars and vans for the first 10,000 miles is a 10p increase from the previous 45p per mile rate.

This rate still falls to 25p once a driver has covered more than 10,000 miles in a year.

Despite this welcome headline rise, the motorcycle mileage rate stays the same at 24p per mile and the bicycle rate remains at 20p per mile.

Employees can also claim 5p per passenger, per business mile for carrying passengers in their car or van.

How does the Approved Mileage Allowance Payment Rate affect employees?

If your employees travel for work in their own vehicle, they are able to claim back the money for every mile they have driven or cycled.

You can choose to reimburse employees above these rates but be aware that the excess is subject to tax and National Insurance.

If you are paying below these rates, employees may be able to claim tax relief on the shortfall, so it is worthwhile letting them know.

We recommend taking a moment to review your current mileage reimbursement policy.

If you’re unsure how these changes affect your business or want to check your payroll is set up correctly, we’re here to help.

Get in touch today for expert advice on tax relief.

Salary sacrifice cap and the squeezed middle

Accountants Essex Blog, Business News, Newswire
Salary sacrifice cap and the squeezed middle

The £2,000 cap on National Insurance (NI) free salary sacrifice pension contributions was sold as a tax on high earners but, if you look closer, the opposite is true.

In fact, the people most exposed are middle-income savers and the small businesses that employ them. For the so-called “squeezed middle”, it is yet another quiet hit to take.

Why do the rules adversely affect middle-earners?

From April 2029, salary sacrifice tax relief will continue to be available, but only the first £2,000 of employee pension contributions each year will be free of NI.

Anything above that becomes liable to NI for both the employee and the employer and the full adverse effect is clear once the different rates of NI are accounted for.

If a person’s total pension contributions are modest, say up to six per cent, those individuals who earn between £35,000 and £50,270 will pay an eight per cent NI charge on pension contributions above the £2,000 cap.

By contrast, an individual whose earnings already exceed the upper earnings limit of £50,270 will pay employee NI at just two per cent on those same excess contributions.

This imbalance in the NI system means that those on lower incomes could pay four times the NI rate on their pension savings in excess of the new threshold than the highest earners pay.

How does this change affect employers’ National Insurance bills?

Many employers currently share their own NI savings by topping up staff pensions, but a new 15 per cent employer NI charge on contributions above the cap makes those top-ups unaffordable for a lot of firms.

As a result, some employees could see the overall efficiency of their pension saving above the cap fall by as much as 23 per cent once lost top-ups are counted.

Even those who stay below the threshold are not safe, as the Office for Budget Responsibility (OBR) estimates that around 76 per cent of higher employer costs are eventually passed back to staff through weaker pay rises and trimmed benefits.

Don’t wait for the change

The good news is that there is time to plan, as the rules do not take effect until April 2029, which leaves room to act while current allowances still apply.

If you are a middle earner, this is exactly the moment to review your pension strategy, weigh up complementary options such as ISAs and make sure your retirement plans stay on track.

To talk through what the salary sacrifice cap means for you, please get in touch with our team.

Five reasons to outsource your bookkeeping to an accountant

Accountants Essex Blog, Blogs, Business News
Five reasons to outsource your bookkeeping to an accountant

Running your business means spinning a lot of plates and you shouldn’t have to sacrifice growth to stay on top of your bookkeeping.

That is why many businesses are keen to explore the benefits of outsourcing their bookkeeping to professionals, to help them free up more time.

Before you make the move, you may be wondering how outsourcing can really support your success:

  1. It’s more cost effective than you think

There’s a common assumption that outsourcing is expensive, but it can often reduce your overall costs.

Hiring-in house comes with salaries, employer taxes, pensions, training and overheads.

That is adding a lot more costs to the service.

Outsourcing means you are only paying for what you need and you do not have to commit to a full-time hire for expert financial support.

So, whether you need ongoing or occasional support, you can control the costs and uphold professional standards.

  1. You get your time back

Bookkeeping is an important cog in running your business and keeping you compliant.

However, it rarely is the best use of your time as a business owner or senior leader.

Hours spent reconciling accounts or chasing paperwork are ones that could be used to focus on your sales and growth.

Outsourcing frees you and your team from these routine tasks.

You can focus on building your business and improving your operations. While you know your finances are keeping up behind the scenes.

It also reduces the pressure on your team to manage the bookkeeping and allows them to have tunnel vision on higher-value work.

  1. Access to expertise without the overheads

Outsourcing allows you to rely on a team of trusted professionals, instead of one person.

Qualified accountants bring that expertise and  knowledge of the latest regulations that an in-house bookkeeper may not possess.

This can help to reduce errors and ensure that there is informed advice on hand when you need it most.

They can also be there to support you as you grow and give you expert advice as your team expands, without the additional costs of hiring in-house.

  1. Keep you compliant

Mistakes in bookkeeping could really put your business at risk of fines and reputational damage.

Outsourced providers already have the correct processes and systems in place to make sure your reporting is accurate and efficiently handled from day one.

  1. Better insights into your business

Successful bookkeeping is all about understanding your business and knowing what is coming in and going out.

Not having the right financial support means you could struggle to use your data to help support your decisions.

Outsourced providers will often use advanced cloud-based accounting systems that give you real-time access to your numbers.

Given the current uncertainty that many businesses are facing, outsourced bookkeeping can give you better visibility of your financial performance, including your cash flow and profitability.

Why should you outsource with us?

Outsourcing has many benefits, but it only works with the right partner by your side.

Our team will take the time to understand your business and tailor our services to your team.

We will help prepare your annual accounts, maintain your VAT records and can also offer management accounts, which will help give you a deeper understanding of your operations so you can make informed decisions.

If you want to learn how we can support your bookkeeping, get in touch.

Companies House P&L are on freeze, but is your small business off the hook?

Accountants Essex Blog, Blogs, Business News
Companies House P&L are on freeze, but is your small business off the hook?

The Government has confirmed it is putting its requirement for small and micro companies to publicly file profit and loss (P&L) information at Companies House on hold.

This is all part of the reforms under the Economic Crime and Corporate Transparency Act (ECCTA) and has eased some immediate pressure on small businesses.

However, they might not be off the hook just yet.

What was originally proposed?

The P&L reform was meant to increase what small businesses will need to disclose publicly and was meant to come into effect on 1 April 2027.

The original plans would have required small and micro entities to submit full statutory accounts, including a detailed profit and loss statement and this would be available on the public record.

Many smaller companies are currently able to limit what they disclose through abbreviated or filleted accounts.

This allows some performance data, such as profit margins and cost structures, to remain confidential.

The Government’s goal was to improve trust in company data and make it harder for misleading financial reporting to go undetected.

Why has the change been put on hold?

The pause comes following strong feedback from businesses and professional bodies, who raised concerns about the impact of full disclosure.

One of the biggest concerns for businesses was putting sensitive information in the public domain, which could be accessed by competitors.

Profit and loss data are linked to pricing strategies and competitive positioning for many small businesses.

Making this information publicly available could have left some firms at a disadvantage, especially in sectors where margins are tight.

There was also the concern about the additional compliance burden on firms with smaller teams and fewer administrative resources.

Having to prepare more detailed accounts for public filing would likely have taken more time and increased their professional costs.

Many owner-managed businesses are already dealing with rising costs and these reforms would not have come at a good time.

What does this now mean for businesses?

The current filing system is staying intact and companies can continue to submit reduced disclosures.

There is currently no confirmed timeline for reintroducing the requirement, although you should not presume it is removed from consideration.

The government has promised that if the policy returns, then businesses will be given enough time before any implementation.

Businesses still need to make sure they are keeping informed on any changes and there are also still reforms at Companies House that are continuing at pace.

The register is undergoing an overhaul aimed at improving accuracy and reducing the risk of misleading filings.

Some other changes already underway are stricter identity verification for company directors and increased enforcement on challenging incorrect information.

Financial disclosure may have been temporarily eased, but overall compliance is becoming more robust.

What should you be doing to stay compliant?

This waiting window, before any reforms are enforced, gives you some time to review your internal processes.

Your business needs to make sure you are maintaining accurate records and this will support your compliance and decision-making.

Even without public P&L disclosure, stakeholders will continue to expect transparency in your records.

Our team can help make sure your finances and records are in order and you are prepared for any scrutiny that may be on its way.

Do you want to learn more about how we can support you? Get in touch.

 

Why you need management accounts to help your small business survive

Accountants Essex Blog, Blogs, Business News
Why you need management accounts to help your small business survive

Running a small business right now might feel like the odds are stacked against you. So, it may not be surprising that six in ten small businesses are shutting their doors within their first three years, according to the UK Office for National Statistics.

Whilst you may have a close eye on your broader finances, there are often trends that are less obvious, but that could still have a substantial impact on your business.

Those who are surviving and continuing to grow are the ones who truly know their operations inside and out. This should start with the creation of detailed management accounts.

What are management accounts?

Management accounts are financial reports that give you real-time data on your business’s performance.

These are created monthly or quarterly and are not to be confused with statutory accounts, which are created once a year.

These accounts often include:

  • Profit and loss reports
  • Balance sheets
  • Cashflow statements and forecasts
  • Key Performance Indicators (KPIs)
  • Budget comparison
  • Analysis of trends

Why are small businesses struggling?

We’re seeing too many small businesses running into trouble because they lack financial clarity.

Not being aware of potential cash flow issues or rising costs means they can quickly snowball into something that is much harder to fix later on.

You need to have regular reporting by your side so you can make sure you are not missing the early warning signs of declining profitability or overspending without realising.

How can management accounts benefit your business?

Cash flow

Management accounts allow you to see where your money is coming in and out and this can help you anticipate any gaps or cash shortages before they become a problem.

It allows you to build realistic forecasts and budgets and this is crucial for setting achievable targets for your growth.

Forecasting can also help you plan for any quieter periods or downturns. You can check if you have enough money in the bank to build a cash reserve as a safety net for any unexpected costs.

Knowing exactly where your numbers lie can sometimes help avoid last-minute borrowing, which is what every business hopes for.

Decision making

You don’t have to wait around until year-end to look at your data or go in blind when making decisions on the future of your business.

These real-time reports allow you to respond immediately to any changes in performance.

It also means you can feel confident in your next move, whether it be adjusting your pricing, reducing costs or investing in your growth.

Profitability

Management accounts break down your costs, revenue streams and spot which areas of your business are actually making money.

You can then refine your strategy to make sure you are driving profits and see where any unnecessary costs can be cut.

Performance tracking

KPIs and budget comparisons can all help you measure your progress against your goals.

If sales dip or expenses unexpectedly rise, you can spot it early and take action before it escalates.

Credibility

If you’re looking to raise finance or secure funding, detailed management accounts can give you the evidence that stakeholders need.

They can prove to lenders and investors that your business is growing and heading in the right direction. This will allow you to stand out and make your business a much more attractive investment.

Let us help you

All these benefits sound great on paper, but you need to make sure you are implementing them and this is where we can help.

Our professional team can prepare detailed financial reports for your business and make sure your data is accurate and compliant.

We can break down what the numbers mean, potential trends, risks and growth opportunities, so you can focus your plans around them.

We can also support your budgeting and forecasting and make sure you are staying on the right track to growth.

Businesses are already fighting tooth and nail to stay afloat ‘and management accounts ca offer a crucial lifeline.

For further advice on your management accounts, get in touch.


MENU