Making Tax Digital

Or MTD as it gets abbreviated to.

What is it, what’s going to happen and how’s it going to affect me?

  • MTD is designed to move the reporting of tax in to the digital environment. Why? Well, HMRC want to give themselves the best chance of ensuring they collect as much tax as they can, (They would do, wouldn’t they!) and requiring quarterly information from businesses means they can do this.
  • Tests using the proposed software have already been done by HMRC for Income Tax and tests for VAT will start in Spring 2018. The data required from April 2019 will be for businesses above £85,000 (The thresh-hold for registering for VAT), with those businesses being required to submit quarterly data.
  • The current plan is to extend this to Income Tax from 2020. Now, call my cynical (I prefer realistic!) but a lot of government related activity tends not to run to timescale and ends up with issues and delays, so don’t be too surprised if this gets delayed.
  • One very important point on the Income Tax quarterly requirements is that you will only be required to submit electronic data each quarter, not do a tax return each quarter. It will not mean paying quarterly income tax either. What it will do is tell you how much you are likely to be paying come the end of the tax year, though.
  • This is going to hit businesses hardest who don’t currently use online or other software for their records, like those using spreadsheets or those just keeping manual records and/or paperwork. It’s also likely that you will have some extra costs too. If you fall in to this category, give me a call and I will give you some free advice.
  • If you do use online software currently (like Xero, for example), then you already have this information, so the process shouldn’t really impact you much.

If you want to discuss this further, then please give me a call or e-mail me (details below), or if I can  help you with anything accountancy related, please let me know.

e-mail: nic@taofinancial.com

mobile: 07985 645087

website: www.taobusinessservices.com

twitter: @taofinancial

Sole Trader or Limited Company?

I have often been asked this question. If there was a simple, clear-cut way of answering it, this blog wouldn’t be necessary, I guess!

However, there are a few points to consider before you decide;

  • Is there a tax advantage with a Limited Company? – Well, there could well be, depending on how much you want/need/can afford to pay yourself and what your levels of sales and profit are. Corporation Tax is now 19% and Income Tax 20% but either or both of those could change. You can pay dividends via a Limited Company but now only the first £5,000 per year is tax free. However, your salary and pension, for example, are business costs for a Limited Company and so can be deducted from sales before applying Corporation Tax.
  • With sole trader status, there is no distinction between personal and business assets, whereas with a Limited Company there is. This could be an advantage under certain circumstances.
  • Limited Company status can project a different image than a sole trader but be mindful that there are additional responsibilities with a Limited Company, such as insurances, preparing and filing annual accounts, complying with tax and labour law etc, as well as the additional costs that go with these.
  • And a final caution regarding IR35 legislation. If you set up a Limited Company with yourself as the sole Shareholder and Director as you believe you’ll be financially better off but you only have 1 customer or 1 main customer, HMRC may view this as you being effectively employed by that customer and this could lead to National Insurance being due. The actor, Robert Glenister was recently “caught” on this very point.

 

So, no, there isn’t a simple, clear-cut answer but I can advise you on whether a Limited Company might be the right thing for you. Contact me on any of the ways below and I’ll be happy to have a free chat with you:

 

e-mail: nic@taofinancial.com

mobile: 07985 645087

website: www.taobusinessservices.com

twitter: @taofinancial

Starting a Business?

You’ve had enough of working for other people.

You’ve had an idea about starting your own business.

But what do you need to do?

 

Yes, starting a business of your own is exciting (and also daunting), so here’s a few areas you need to cover;

 

  • Plan – What is your market and how are you going to get to it?, How much are you going to charge?  What does your Profit & Loss look like? Where is your cash coming from?
  • Decide on your business structure – Is self-employment or a Limited Company the best way to go and what do I do to set these up?
  • Set up a business bank account. And shop around for an account that suits you and your pocket.
  • Keep records. Or get someone like a bookkeeper or accountant to do it for you.
  • Do I need specific accreditations and/or insurances?

 

It’s not an exhaustive list and you’ll need help.

For a free chat, contact me on any of the ways below and I’ll give you that help.

Telephone: 01922 430997

Mobile: 07985 645087

e-mail: nic@taofinancial.com

website@ www.taofinancial.com

twitter: @taofinancial