Business News

Companies House has gone fully digital after the announcement of the closure of its office in London and all filing being transferred online.

It has also permanently shut the public counters in Cardiff, Belfast and Edinburgh.

Online services will be available 24 hours a day, seven days a week.

Changes have taken place with improved security features, which include:

• Multi-factor authentication
• The ability to link your company to your WebFiling account to give you more control over your filings
• Being able to digitally authorise people to file on your behalf on WebFiling, and to remove authorisation
• To view who’s digitally authorised to file for your company
• An option to sign up for emails to help you with the running of your company

WebFiling is an online service that Companies House provides, designed to make the submission of official paperwork easier and paper-free.

Once you’ve linked your company to your account, you will not need to enter your authentication code every time you file online.

Key changes include:

• Filing deadlines will not be shortened at the moment, but legislation will be introduced to facilitate future changes.
• Small companies will no longer have the option to prepare and file abridged accounts and will be required to file both their profit and loss account and directors’ report.
• Micro-entities will also be required to file their profit and loss accounts but will continue to have the option to not prepare or file a directors’ report.
• Dormant companies will be required to file an eligibility statement.
• All companies will be required to file accounts digitally, with full tagging.

Managing your Companies House requirements can be time-consuming and distract you from growing your business. Why not find out how we can help you? Speak to our experienced team today.

Chancellor Jeremy Hunt has announced a series of changes to the UK research and development (R&D) tax credit regime, including a cut to the deduction and credit rates for the SME scheme. 

The R&D SME scheme enhanced deduction rate will be cut to 86 per cent from the current 130 per cent, and the payable tax credit rate cut to 10 per cent from 14.5 per cent.

However, the rate of the separate R&D expenditure credit – also known as RDEC – will increase significantly, from 13 per cent to 20 per cent. 

The changes to the SME scheme mean that if you are a loss-making company, you will now only receive £18.60 for every £100 spent from April next year, compared to £33.35 per £100.

These changes are intended to reduce abuse in the R&D tax system, particularly claims for SMEs, which have been the spotlight of several investigations by HM Revenue & Customs (HMRC).

They are scheduled to take effect from 6 April 2023, so there is still time to plan, and it may make sense to bring forward R&D expenditure, where possible, to benefit from more favourable deductions and credits.  

If you have any queries about this change to R&D tax relief or require assistance making the most of the current opportunities on offer, please contact us.

Planning for the future is essential when running a business and, ideally, you should have a perspective of where you want to be in three to five years.

Goals or targets provide a sense of direction, focus, and motivation. But how do you set aims effectively?

You could try the SMART method. This relies on five key criteria – Specific, Measurable, Achievable, Realistic, and Time-Based – which allow you to create a clear target for success.

What is the plan to get you there?

It may be that small steps are needed before achieving the ultimate goals and could include:

• Establishing your USP. What can you offer that the competition cannot?
• Identifying your ideal customer, do you need to pivot the business to attract new clients?
• Maximising talent. Your staff are your most important asset.

How you can build SMART goals into your business plan:

Specific

A specific goal clearly defines what needs to be achieved, by whom, where and when it is to be achieved (and sometimes why).

Measurable

Measuring draws your focus, and the latest tracking software can measure this accurately.

When you measure, you need to ask certain questions:

• How much?
• How often?
• How many?

Achievable

When you set goals, ensure they’re achievable. It’s a mistake to set unreachable goals because you’re setting yourself up for failure from the beginning.

Realistic

Make sure the goal that you set has long-term importance in what you want to achieve as an individual or an organisation.

Time-based

It sounds obvious but set up a timeframe. A deadline can be an excellent motivator.

Struggle to set goals? Need help monitoring your KPIs? It makes the most sense to seek professional support so you can create a SMARTer approach to working.

If you would like advice on your business strategy, backed up by the latest business intelligence, please get in touch.

Millions of new taxpayers will be created by the extended freeze on the income tax thresholds.

In the Autumn Statement, the Government froze the thresholds until 2028 – two additional years on its original plans.  

The income tax thresholds for basic (20 per cent) and higher rate (40 per cent) taxpayers will remain unchanged, while the £12,570 personal allowance, the amount you can earn before you start to pay tax will also remain the same. 

In addition, for those paying the additional rate of 45 per cent, the threshold has been reduced from £150,000 to £125,140 from 6 April 2023. 

In what has been described as a stealth tax, the freeze is likely to lead to many taxpayers being fiscally dragged into higher tax bands by inflation, and with it many individuals’ wages and income.

There are many tax-efficient ways of mitigating what you pay in tax, including: 

Pension top up 

You can reduce your income tax by topping up your pension using your annual tax-free allowance. Personal pension contributions within the annual £40,000 pension allowance lower your ‘adjusted net income’, which HMRC uses to calculate your tax bill. 

ISA allowances 

ISAs are a tax-efficient way of saving. You don’t pay income tax or Capital Gains Tax (CGT) on investments inside an ISA, and you can withdraw money whenever you like, tax-free. You can currently invest up to £20,000 in ISAs.

Double your tax allowance 

If you’re married or in a civil partnership, your tax allowances can, in some cases, be combined to increase your household’s income tax allowance. For example, the Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner if they haven’t used it.

If you are unsure of the tax-saving opportunities available to you, you should seek professional advice. To find out how we can help, please contact us.

Inflation has been described as paying £15 for the £10 haircut you used to get for £5 when you had hair.

It is soaring at the moment and leaves business owners facing real problems. If they increase their prices, they risk losing customers, but if they peg prices, they put their profits and potentially their business at risk.

Inflation hits just about everything, from raw materials to higher fuel and energy costs to customer confidence.

The hope is that it will be short-term, but with borrowing costs spiralling as interest rates rise, businesses should look at practical savings and decide:

• Are you paying for services you no longer use regularly?
• What measures can you adopt to cut energy bills?
• Can you achieve discounts with bulk ordering or cut costs by reducing excessive orders?
• Are you making efficient use of your staff?

Maximise technology use

Accounting and financial technology can give you instant information on sales, costs and products and allows cloud-based apps to reduce the time needed for vital but time-consuming tasks.

This can include invoicing systems that tell you what’s been paid and other apps that help you keep track of your cashflow.

Examine your products and workforce

• Can you abandon or suspend certain products which deliver weak margins? At the same time, can a best seller withstand a price increase and boost profitability?
• Are you overstaffing shifts?
• Do you have lengthy processes with unnecessary steps?
• Do you really need those temporary workers?

Stay competitive and prioritise customers

Check out the competition, both locally and nationally, to see what they are charging for similar products and services.

This can often depend on different areas of the country and levels of relative prosperity. Can less well-off consumers withstand price increases?

Make maximum use of your accountant

Accountants offer a wide range of services, including strategic advice and money-saving and revenue-boosting ideas, including:

• Advising on business strategy
• Addressing your cashflow
• Debt management and credit control.

Is your business struggling with the strain of inflation? Get in touch to find out how we can help you create strategies to help you better monitor and manage your costs.

Link: Effect of inflation on business

Investing in property can still provide a strong return, but it needs careful planning to achieve the best outcomes.

Just buying new properties without a clear strategy would be risky.

While it is true that rates of interest continue to increase, as do many of the costs associated with being a landlord, with the correct approach property can continue to provide a good income.

Mortgages

Many landlords enter the market by purchasing their property using a buy-to-let mortgage.

In the past, these have provided a competitive means by which to purchase new houses with minimal deposits.

In many cases, landlords have even forgone paying off their mortgage favouring interest-only buy-to-let mortgages, which minimise their monthly outgoings to enjoy a greater overall return.

However, with the Bank of England steadily increasing the base rate, many lenders are also increasing their interest rates driving up the cost of debt.

For those on fixed-rate mortgage deals, their current rate shouldn’t change until their current offer ends, but for those on tracked and variable rates, which increase alongside the base rate, the costs of their mortgages could wipe out any profits.

Lenders are unlikely to offer any new fixed deals at lower rates for some time, so what can be done to cut mortgage costs?

One option to consider if you already have multiple buy-to-let mortgages is consolidation.

Consolidating multiple debts into a single property loan could help to reduce the amount paid overall.

Especially if you have a wide variety of rates on each previous loan. This could help to reduce the overall cost of your lending.

If you are considering further growth and you have multiple mortgages, you might want to consider a buy-to-let portfolio mortgage.

Many lenders offer this kind of product, which allows you to combine your borrowing under a single web of loans, while also allowing you to use the equity within the portfolio to cover deposits for new homes.

Incorporation

If you currently operate as a sole trader it might be worth considering incorporating your portfolio into a limited company.

This carries with it several advantages, including:

• Limited companies currently pay Corporation Tax at 19 per cent. This is lower than income tax on profits, which if you are a higher-rate taxpayer is paid at 45 per cent.
• You can still enjoy a 100 per cent tax relief on the mortgage interest your limited company pays. This is restricted on personally held properties to just 20 per cent.
• It is easier to transfer limited company shares to beneficiaries or others than privately held property.

While incorporation has its benefits it also comes with the additional Companies House administration and you would have to pay Stamp Duty Land Tax on the transfer of your portfolio into a limited company, which could be costly.

Looking to sell?

We appreciate that given the current situation, some landlords might be looking to dispose of some or all of their property portfolio.

If this is the case, then they need to consider the tax implications of doing so.

When a main home is sold, there is usually no Capital Gains Tax (CGT) due thanks to Principal Private Residence Relief, but tax may be owed on the gains you have made on a second home or investment property.

Higher and additional rate taxpayers pay CGT on property disposals at a rate of 28 per cent, while basic rate taxpayers may pay tax on some of their chargeable gains at a rate of 18 per cent.

Tax is only charged on the gains made on a property, not the total value of the sale, and most taxpayers benefit from an annual CGT tax-free allowance of £12,300 (2022/23).

Any CGT due on UK residential property disposals made by UK residents must be reported and paid within 60 days of completion.

Whether you are looking to grow or sell your portfolio it is important to have a plan in place and seek professional advice to make the most of your assets.

If your property portfolio has been affected by recent changes to legislation or rising costs, it is important that you speak to us for the latest advice and guidance.

If you are an owner of a limited company, taking money out of your business using dividends is a mainstay of effective tax planning, thanks to an additional £2,000 annual allowance and lower rates than apply when taking money in the form of salary.

However, there are restrictions on the circumstances in which a limited company can pay a dividend.

Crucially, the company must have sufficient profits from the current and previous financial years to cover the dividend payment.

The company will also need to pay a dividend to all eligible shareholders, so you will need to factor this into any calculations.

Dividends must be declared by the directors and minutes of the meeting must be kept, even if there is only one director.

A dividend voucher will need to be prepared, including the date, the company name, the names of the shareholders receiving the dividend and the amount.

Copies must be given to the shareholders receiving the dividend and retained on the company’s records.

Be aware, that the current £2,000 Dividend Tax Allowances will be reduced to £1,000 from April 2023, and then cut further to £500 from April 2024.

It is important to consider the impact that this could have on your tax planning.

For decades we have helped business owners find the most tax-efficient way to take money out of their businesses. To find out how we can help you, please get in touch.

Link: Running a limited company: Your responsibilities