In Tax

How Do You Save Paying National Insurance ?

Posted by: on Aug 25, 2012 | No Comments

I was reflecting on what work I had done this week and thought it would be useful to pass on a client scenario I researched this week.

A private client who is employed as a company director at a medium sized company changed employer last year. He earned above the higher rate tax band in both companies. Directors often pay national insurance contributions (NIC) cumulatively so potentially 12% employee national insurance paid in the basic rate tax band at both companies. I investigated whether we could get him a NIC rebate and concluded that if the second employer pays NIC on a cumulative basis you can send a letter to HM Revenue & Customs (HMRC) to request a rebate.

That lead me to thinking of the other potential savings you can make on national insurance contributions:

If you have two or more jobs during the tax year ending 5th April 2013 you can earn approx £7,500 in each job before you pay NIC;

If you have a job and are self employed during the tax year ending 5th April 2013 you can earn approx £7,600 before you pay class4 NIC on the self employment (plus the approx £7,500 in the job before you pay NIC);

If you earn less than £5,564 profits from self employment in the tax year ending 5th April 2013 you can write to HMRC to get a rebate of your class 2 NIC;

If you are employed and self employed in the same tax year and are a higher rate taxpayer it is likely that you can get a rebate of Class4 NIC;

If you are a Director/Shareholder of a small Limited Company you can pay no Tax and no NIC up to the NIC personal allowance and pay no NIC on dividends. There are a lot of other factors affecting your decision to set up a Limited Company and you can refer to my other blog for that.

As always Sir Tax Accountants in the Camberley area will do everything we can help to reduce your taxes so feel free to contact me if you require any clarification of the above on 01276 451465, mike@sirtax.co.uk

Making Your Business Profits (Boat) Grow (Go) Faster

Posted by: on Jul 6, 2012 | No Comments

At this months Entrepreneurs Circle meeting we had an inspirational presentation from Olympic gold medal winner Ben Hunt-Davis. I Know what you’re thinking – who the hell is he? Well I have got to say that was pretty much my reaction, however he comes with good credentials for helping business owners being one of the coxed 8 rowing team that won Gold at the Sydney 2000 Olympics.

Why is that relevant to business ? Well Ben described a typical business scenario of having several years not quite getting to the top of his trade before he started to changed his thinking. For 7 years his team of eight had regularly come seventh in major competitions. Coming seventh is like coming nowhere since only the top six qualify for the finals.

When the team for Sydney 2000 was assembled they did things differently. Every one of their habbits was linked to their driving force “Will this action make the boat go faster”. That included having a beer before training or a race (answer obviously no – so don’t do it). A favourite saying was “Today’s going to be a good day because I’m going to make it a good day”.

The team worked smarter not necessarily harder and in fact reduced the number of training sessions from 21 to 19 per week (ok 19 times a week requires major dedication which 99% of rowers would not match). They operated continuous improvement processes, literally analysing every training session and race to see how they could make improvement. On one occasion they actually had a physical fight in the boat, so plenty of improvement possible after that. Great detail was observed and terminology such is ‘separation of the hands’ defined carefully to make sure there were no misunderstandings, hence best performance was achieved.

All business owners can learn from these philosophies to do things differently, reaxamine the business, continuous improve, and have a single minded determination to achieve your goals. Ben’s mantra and title of his book was “Will It Make The Boat Go Faster” ? What is your equivalent mantra that will drive your business to achieve your Goals.

Do You Want to Save Tax ?

Posted by: on Jul 6, 2012 | No Comments

The press have had a field day over the Prime Ministers personal attack on Jimmy Carr over legally saving tax. You will have to decide for yourself whether you think it is morally wrong or not. You also will have to decide yourself whether the HMRC tax settlements with big companies like Vodafone is morally acceptable or not. Mr Cameron is not shouting too much about that is he ? And he refused to comment on Take That star Gary Barlow’s tax affairs – saying it was a different case. It puts a whole new slant on the phrase ‘Take That’.

So what should small business owners do to legally save tax ? If you start a business from scratch it is often a good idea to to start as a sole trader to prove your business concept and have the flexibility of self employment until you have established your business foundations. When you are confident of the resilience of your business you should consider the tax saving possible through converting to a Limited Company. I usually suggest that sole traders consider incorporation after reaching profits in excess of £30,000 (dependant on your circumstances). Various factors can influence the timing of your incorporation, eg do you use a registered childminder hence qualify for childcare vouchers, or would you benefit from a company pension, etc. Before you decide to go ahead with incorportion you should consider the pro & cons. See my earlier blog re the pro & cons of incorporation.

Have you got a family member who could make a contibution to business, and hence pay them wages and/or give them some company shares. Could you use company resources to develop products or process such that you qualify for research and development tax credits ? This can offer very attractive tax incentives. High end TV and computer game designers can also also benefit from tax breaks introduced in the budget. Make sure you consult with your accountant to benefit from these and other more advanced tax strategies.

Sir Tax Accountants of course support all legal methods of saving tax. We will help business owners in Camberley and surrounding areas review your business processes and marketing strategies to grow your business profits. After all the higher your profits the more opportunities there are for tax savings.

Should you Model your Business on The Queen ?

Posted by: on Jun 26, 2012 | No Comments

Now media coverage of the Queens Diamond Jubilee settles down it is good to reflect on what we can learn from the 60 year reign. The Queen represents a fantastic example of how you should run your business.

Firstly it is very clear that the Queen has a detailed plan that has been prepared months or even years in advance. The logistics involved in organising the 1000 boat Pageant on the Thames required meticulous planning. And the same goes for the faultless presentation of her other many engagements before and after the jubilee celebrations. Every business needs a plan with deadlines, and those deadlines mean you must achieve implementation which is the key to your success.

Clearly the organisation of these events requires the backing of a good team. Being crowned Queen at such a young age must have been a really frightening experience. Certainly I can remember how scary the first year in business was. You have to achieve sales to pay the bills. There is no better incentive than that. Business owners are well advised to make connections with experienced business associates who can help mitigate those initial challenges and indeed allow you to grow in future years.

In the accountancy professional each year we are required to follow programmes of continuing professional development. It is clear that the Queen knows who her customers are. By reading newspapers and relevant documents every day the queen is doing her continuing professional development so she can communicate to her target market in an informed manner. All businesses should do the same.

Fashions have changed dramatically over the last 60 years but The Queen has consistently presented a style and image that is recognised throughout the world. All businesses would benefit from consistently presenting their branding and message to their target market.

The Queen is respected and admired throughout the 54 commonwealth nations she represents, and indeed throughout the world. Her ability to continue to smile and wave at the attendees at the pageant on the River Thames while standing for several hours was amazing. Despite some difficult times over the years she has had the dedication and determination to continue to serve the nation. Any business owner who can emulate these characteristics will surely have a business to be proud of.

Sir Tax Accountants help small business owners minimise their taxes and also review how you grow business profits, in Camberley and surrounding areas.

Will Higher Rate Tax Relief on pensions be removed ?

Posted by: on Nov 11, 2011 | No Comments

There is increasing speculation that the government is considering removing higher rate tax relief on pensions.  We can’t be sure whether this will happen, but may it be announced in the 29th November 2011 Autumn Statement.   Last time the government changed pension tax relief, the changes took place with immediate effect, giving pension investors no time to act.

If you are a higher rate taxpayer you may want to consider doing so before 29 Nov 2011.  Personal Pensions are one of the most tax efficient ways to save for retirement. Tax relief is given at up to your highest rate. For taxpayer in the highest rate 50% tax band, £10,000 invested in a pension could cost as little as £5,000. For a 40% rate taxpayer £10,000 invested in a pension could cost as little as £6,000. Currently you to take up to 25% as a tax free lump sum from age 55.

Of course we can not be sure that the higher rate of tax relief will disappear on the 29th Nov, but if you were planning to make a pension contribution this tax year, and have the cash flow available, early action may be of benefit.

Taxpayers can contribute up to £50,000 per year, and there are special rules which allow you to invest more if you have not used up all of the prior year allowances.

Sir Tax Accountants Camberley continue to look for way to reduce clients tax liability. Please feel free to contact us if you require further information 01276 451465.

In Tax

Sole Traders – Consider 45p per mile

Posted by: on Oct 26, 2011 | No Comments

Are you are a sole trader and have turnover below the VAT threshold (currently £77,000) ?

If the answer to that question is yes then next time you purchase a car for business use you should consider the tax benefits of claiming 45p a mile instead of claiming the usual fuel, insurance, servicing, road tax, etc expenses and capital allowances.

When you cannot claim Vat on the fuel you use, in many cases recording your business miles and claiming 45p a mile is more tax efficient than claiming all of your expenses.

If in doubt contact your accountant for a more detailed assessment.

Sir Tax accountants in Camberley are proactive in looking for ways to reduce you tax liability. Contact Mike@SirTax.co.uk 01276 451465

The Royal Wedding Opportunity

Posted by: on Apr 27, 2011 | No Comments

Whether you are a royalist are not I sure you will have an opinion whether the extra bank holiday is a good thing or not.
Small business has been hit hard in the recent years with the statutory minimum for employee holidays increasing from 20 days to 28 days, so a further day is unlikely to be welcome from business owners already under pressure in a slow moving economy.
Businesses that sell products would have been well advised to seize the opportunity and release a royal themed product a few weeks ago. And creative service companies could for example have offered a free glass of champagne this week when clients attend a consultation.
Small business owners should check employee contracts. If the contract says staff are entitled to 28 days holiday there is no obligation to offer staff the extra day holiday. But you should also consider the effect on staff morale if you don’t offer the extra day off. So where is the opportunity for small business owners stuck with this dilemma. All too often staff take business owners for granted. So why not take the opportunity to have a team briefing with staff and explain the affect on the business from the lost time, and that you need a commitment from staff to increase productivity so that the lost time does not damage the viability of the company.
As Camberley accountants we offer clients business advice as well as tax planning. We hope it helps.
Looking forward to the street party on Friday – enjoy the day.

Sole Trader vs Limited Company – How Should You Structure Your Business?

Posted by: on Nov 24, 2010 | 2 Comments

Are you starting a business ?

That can be quite scary if you have never run a business before.

How do you structure the business ?

The question of whether you set up as a Sole Trader or Limited Company tends to be more involved than you think.

As for all areas of tax planning you should consult your accountants before you take action not afterwards. Sir Tax Acountants Camberley are happy to give advice on the issues listed below.

There are 3 scenarios (not including further options for partnerships):

1       Do you start with the intention of trading as a sole trader until you cease trading or sell the business ?
2      Do you immediately set up as a Limited company ?
3      Do you start as a sole trader with the potential strategy to convert to a Limited Company at a later date when you have proven the growth potential of the business ?

The answers to these questions will inevitably be affected by individual’s circumstances. Key points to note are as follows:

1      Sole Trader

• Operating as a sole trader is the easiest approach from an administration point of view, and gives you flexibility in terms of how capital is introduce and drawn from the business.
• It is easy to start a sole trade business – just make sure you contact HMRC within 3 months of trading to avoid a fine.
• Your legal obligation is to submit a tax return to HMRC by 31st Oct for paper filing or 31st Jan for online filing
• You should adopt the mentality that you are growing your business to sell your business. In some circumstances it is more advantageous from a tax point of view to sell a sole trade business than a Limited company

2       Limited Company

• Operating as a limited company can: offer some tax advantages; limit your personal liability if the company fails; and give you a better level of credibility with your potential customers
• As a director of a Limited Company you have a number of statutory obligations laid out in the companies act 2006. Keeping it simple you have legal obligations to your shareholders, customers, and suppliers, H M Revenue and Customs (HMRC) and Companies House. Eg, you can only draw dividends from the company if there are profits available to do so
• Each year you are required to: submit accounts and a company tax return to HMRC, Accounts and an Annual Return to Companies house; prepare resolutions to declare dividends and other significant company actions; and operate PAYE and submit the associated returns to HMRC
• Due to the extra administrative effort the cost of accounting is significantly higher for Limited Companies than a sole trade business, so you need to have a reasonable level of profit to make the extra cost worthwhile.
• It is difficult to get buyers to agree to buy your shares when you sell a Limited Company. Under these circumstances it is usually less tax efficient to sell a Limited Company when compared to selling a sole trade business

3      SOLE TRADE transferred to LIMITED COMPANY

• Unless you have experience of running a business it is difficult to be sure how successful you will be. Of course you should do market research and assess the risks in your business plan, as covered by my earlier blogs. Unless you are experienced and confident in your ability to grow your business, it is a good idea to start as sole trader and potentially convert to a limited company at a later date
• If you transfer your sole trade business to a Limited Company you are effectively selling your personal business to the Limited Company. In most cases a ‘goodwill’ value will be created.
• You may have to pay capital gains tax on the goodwill value transferred to the Limited Company, be it at a relatively low rate where entrepreneurs relief is available
• The goodwill value that you transferred to the limited company is available in the director’s loan account and can be useful for tax planning purposes.
• For companies incorporated after 31March2002, the goodwill value can be amortised in the accounts to reduce profits. This reduces the amount of corporation tax to be paid, but you should also be aware that this reduces the amount of profits available to be distributed as dividends.

Please make sure you discuss these points in more detail with your accountant

Marketing Is the Key to the Success of Your Business

Posted by: on Nov 8, 2010 | One Comment

Good accountants will look for all ways to save you tax, but just as important Sir Tax Accountants Camberley recognizes that you must drive the business forward through marketing.

If you are motivated to grow your business you must ‘work on, not in your business’. Key areas to focus on marketing your business follow:

• Successful business owners spend 60% of their time marketing their business. Every business should adopt a tag line similar to “Sir Tax Accountant Camberley are in the business of marketing and accountancy / tax planning services”.

• There are numerous approaches to marketing including: referrals from existing clients & associates; website (yours + free listings + Google local maps); mail shots; telephone marketing; directory adverts; networking; doing seminars / presentations; local newspaper / magazine adverts and PR; TV; radio; joint ventures; etc. What works for you inevitably is very much dependent on the type of business you operate.

• Postcards work well for start up businesses. They are easy to post and interested prospects may keep it for future reference. Thousands can be printed at very low cost. The more you deliver the more you sell. Use both sides or even offer the second side to an associate business. If you sell high value products/services deliver your advert to high value houses. Post between 5pm and 7pm if you want executives pick it up when returning home.

• Social media is becoming an increasingly powerful method of marketing and should not be ignored. Start by setting up a WordPress blog. Use for example Hootsuite.com to flow news posts down to a Facebook fan page, Twitter, and LinkedIn, to achieve maximum exposure at scheduled timeslots. Give useful information to prospects reading your blog to build trust that you are an expert in your field. Build relationships with friends/followers and, with patience, sales enquiries are likely to follow.

You must continuously market your business to grow your business.

New Pension Rules Just Released

Posted by: on Nov 2, 2010 | One Comment

Earlier this year the coalition government announced it would review the complex set of pension rules introduced by the last government to restrict the level of tax relief for higher earners. The outcomes of its review were released on 14th October and are much better than most people expected with a new set of simplified contribution rules. Most changes come into effect next tax year (April 2011) and include:

• £50,000 – the new limit on how much you can contribute into pensions each tax year. From April 2011 you will be able to contribute 100% of your relevant UK earnings, capped at £50,000. Contributions greater than the annual allowance could trigger a tax charge. If you do not use your full allowance in one year you may be able to carry it forward up to three tax years.

Up to 50% – the tax relief your pension contributions could receive. Basic rate taxpayers will receive 20% tax relief, higher rate taxpayers up to 40% tax relief and 50% rate taxpayers up to 50% tax relief. This is good news for very high earners as many expected tax relief to be restricted to 40%.

£1.5 million – the total you can hold in pensions from April 2012 without a tax charge. Until 2012 the limit is £1.8 million. There will be provisions to protect pots already in excess of £1.5 million, otherwise anything above the limit when you take benefits is effectively taxed at 55%.

16 – the factor used to calculate the value of a final salary pension contribution will rise 60% from 10 to 16 in April 2011 to better represent their true value. Final salary contributions will therefore use up a far larger proportion of the new lowered annual allowance and for high earners may even exceed it triggering a potential tax charge

WHAT THIS MEANS

Pension contribution allowances have been simplified and will change from April next year. You will be able to contribute up to your earnings each tax year, capped at £50,000, and receive tax relief at your highest marginal rate (as much as 50%).

If you currently earn more than £50,000 and your total annual income has not reached £130,000 since April 2008, you have the opportunity to make a contribution in excess of £50,000 before April 2011 to boost your retirement savings.

Investors with pension pots nearing or above £1.5 million should take caution, and active members of a final salary pension should be aware of the change to how their annual contribution is calculated.

Please note this is our early understanding of these rule changes. Full details have not yet been confirmed and are subject to change. Furthermore the value and levels of relief will depend upon individual circumstances.

This article is taken from the SIPP Times by kind permission of Hargreaves Lansdown. You can find more information on their website (www.H-L.co.uk).