Are SMEs equipped to deal with HMRC’s Making Tax Digital initiative?

Are SMEs equipped to deal with HMRC’s Making Tax Digital initiative?, accountancy advice, UK tax advice, free tax advice, free company advice, changing from sole trader to limited company, how do I change from sole trader to limited company, limited company advice, forming a limited company, changing from sole trader, sole trader advice, Omni Chartered Accountants, Chartered Accountant Wolverhampton, Tax Advice Wolverhampton, Payroll Services Wolverhampton, CIS Accountant Wolverhampton, Accountant WolverhamptonOne of the keys to HMRC’s “Making Tax Digital” initiatives is the assumption that small businesses will have access to, and be competent with, digital tools such as software or apps to keep records of their trading, income and expenditure.

It is also a fact that many small businesses lack the time or skills to use digital accounting systems. If you are a small business owner, does the work associated with maintaining Digital Tax Accounts concern you?

Bankstream recently surveyed around 200 accountants and found that:

  • Most small businesses don’t use digital accounting systems now
  • Accountants don’t expect this to change over the next 2 years
  • Most accountants are unsure how they will service clients who are unable to use digital accounting systems, but many expect this work to end up on their desk

These results reveal the extent of a common misconception in Whitehall – that most small businesses use (or could use) accounting software to keep their books.

In contrast, Accountants understand that despite an ever-expanding range of small business accounting software, apps and online systems, most small business owners lack the time and/or skills to use such systems. From a business perspective, quite correctly it is about “fit for purpose” and cost.

With the wheels of change now rolling towards the introduction of Digital Tax Accounts and quarterly tax updates, accountants are considering how to equip their practices to cope with increased workload.

Automation of manual tasks such as transaction collection and data entry is a common priority so, while it might be out of reach for many of their clients, accountants are turning to technology as a solution to their current and mounting workload issues.

Are SMEs equipped to deal with HMRC’s Making Tax Digital initiative?

As a business what are your plans and concerns? Talk to us on Twitter @OmnitasTax and let us know your thoughts – remember that Omni Chartered Accountants are here to provide free, impartial advice. Call us today on 01902 837 408 or request a free of charge call-back from our website.


Are you claiming all of the Tax Relief that your business is entitled to?

Are you claiming all of the Tax Relief that your business is entitled to?, accountancy advice, UK tax advice, free tax advice, free company advice, changing from sole trader to limited company, how do I change from sole trader to limited company, limited company advice, forming a limited company, changing from sole trader, sole trader advice, Omni Chartered Accountants, Chartered Accountant Wolverhampton, Tax Advice Wolverhampton, Payroll Services Wolverhampton, CIS Accountant Wolverhampton, Accountant Wolverhampton Following a recent survey by cloud accounting software provider “FreeAgent”, it has been revealed that sole traders and micro business owners are missing out on millions of pounds each year by not claiming tax relief on minor day-to-day expenditure.

Just thirty nine percent of small business owners surveyed were confident that they claimed tax relief on all their allowable expenses with only one in five neglecting to claim back the cost of any expenses at all!

The survey revealed that across the whole of the UK economy, almost £250m worth of expenses with individual values of less than £10 are being disregarded by freelancers. Even if all of these entrepreneurs were basic rate taxpayers, this would equate to £50m of foregone tax relief – of course, this total could be much greater.

Ed Molyneux, CEO and co-founder of FreeAgent, said;

“Whether it’s £5 or £500, that’s all money which you can claim tax relief on, and in the case of the smaller expenses, it’s also money that quickly adds up. We found that nearly one in four micro business owners wouldn’t claim expenses worth £10 or less – presumably because they’re too small to bother with or it takes too much time to log them.

“Even for a freelance business or small agency, those little expenses can end up being worth hundreds, or thousands, of pounds when they’re all combined – so it’s strange that people seem to think it’s too much hassle or not worth the effort to claim these back.”

Research carried out by another Company on behalf of HMRC a few years ago found that claiming for expenses was seen as the most difficult aspect of tax returns by small business owners.

Are you claiming all of the Tax Relief that your business is entitled to?

Half of micro firm owners were uncertain about what was and was not allowed as a claimable expense. One in five believed they couldn’t deduct any of the cost of expenditure used for both personal and business use, when in fact HMRC guidance states that such costs should be allocated to the business on “fair and reasonable” basis.

If you need help understanding what you can and can’t claim, call Omni Chartered Accountants today on 01902 837 408 for free of charge, impartial advice. Our mission is to save you money!


Tax saving for company loans

Tax saving for company loans, accountancy advice, UK tax advice, free tax advice, free company advice, changing from sole trader to limited company, how do I change from sole trader to limited company, limited company advice, forming a limited company, changing from sole trader, sole trader advice, Omni Chartered Accountants, Chartered Accountant Wolverhampton, Tax Advice Wolverhampton, Payroll Services Wolverhampton, CIS Accountant Wolverhampton, Accountant Wolverhampton The personal tax cost of borrowing from your company is currently quite low.

Taxable benefit

If you borrow from your company, you can be taxed on a benefit in kind (BIK) basis; however, relatively small loans are exempt.
Only when the balance owed exceeds £10,000 in the tax year does the charge apply. In the tax year in which you intend to repay the loan is left a small balance which is repaid after the tax year ends.
Because of the way in which HMRC’s standard calculation works, this reduces the taxable benefit. While HMRC can opt to use a different method of calculation, it’s very unlikely that they will.

Tax saving for company loans

For any tax or accounting advice, call Omni Chartered Accountants on 01902 837 408 or click here for a free of charge call back from our website!


HMRC Digital Accounts Push Causes Major Concerns

HMRC Digital Accounts Push Causes Major Concerns, accountancy advice, UK tax advice, free tax advice, free company advice, changing from sole trader to limited company, how do I change from sole trader to limited company, limited company advice, forming a limited company, changing from sole trader, sole trader advice, Omni Chartered Accountants, Chartered Accountant Wolverhampton, Tax Advice Wolverhampton, Payroll Services Wolverhampton, CIS Accountant Wolverhampton, Accountant Wolverhampton HMRC’s push for digital accounts continues to raise concerns in many sectors and also amongst business professionals.

Accountants, privacy experts, politicians and charities are voicing growing worries about HMRC’s ambitions to “fully digitise” the tax return system.

They claim that vulnerable groups will be penalised for not wanting to use the internet, that the quantity of data and information sought by HMRC will increase administrative burden and costs, and that the trend to push everything online will result in far more tax investigations without necessarily raising extra revenue.

They also predict that – whatever it says to the contrary – HMRC’s ultimate intention is to obtain highly detailed data “equivalent to the individual entries on a bank statement”. This is most likely to result in more frequent and earlier demands for payment.

HMRC Digital Accounts Push Causes Major Concerns

There are two prongs to HMRC’s push to “create the most digitally advanced tax system in the world”. One is the introduction of “personal tax accounts” for all individuals, aimed at the majority of people whose tax affairs are relatively simple and who don’t necessarily have accountants.

Here, individuals’ online tax accounts will be updated automatically by HMRC with information it has obtained from other sources. You would log on, for instance, and see those entries relating to your wages or pension, any taxable benefits you receive, such as the state pension, and any interest earned on your savings in bank or building society accounts.

The second digital drive relates to small businesses, landlords and the self-employed: these groups will now have to report information to HMRC on a quarterly basis.

This has already caused a storm of controversy, with 150,000 small business owners petitioning against the change. They argue that quarterly reporting would cost time and money for no gain to the business or HMRC.

What do you think of this approach? Will it benefit or hinder the SME and individuals? Let us know your thoughts on Twitter @OmnitasTax – call us if you have any concerns about the new system and would like free, impartial accountancy advice from our expert team on 01902 837408.


HMRC Changes to Dividends from April 2016

HMRC Changes to Dividends from April 2016

HMRC has clarified the way in which it expects the taxation of dividends and there is no doubt that many people will be affected.

What is changing with dividends?

We are all used to seeing dividend vouchers showing the net dividend that we receive together with a tax credit, and we understand that tax will be charged on the gross figure, with relief for the tax credit.

From April 2016, this system is being fundamentally changed in a way that is likely to mean higher taxes will be payable for anyone with significant dividend income outside the shelter of an ISA or pension fund.

HMRC Dividend Changes from April 2016:

  • The tax credit that is attached to dividends will be abolished so you will be taxed on what you receive, with no grossing up
  • There will be a £5,000 dividend tax allowance so that dividends below this level will be tax free, regardless of your other income
  • Tax rates on dividends will be changed to 7.5%, 32.5% and 38.1% for basic, higher and additional rate taxpayers respectively, a rise at each tax level of 7.5% in the effective rate

Who will be affected by the HMRC Dividend Changes in April 2016?

For investors with modest dividend income, the changes will be limited in their impact. Basic rate taxpayers, used to having their tax liability covered by the tax credit, will be worse off if their dividends exceed £5,000 as they will pay 7.5% on the excess.

Higher rate taxpayers will be better off under the new rules, until their dividend income exceeds £21,667 as the availability of the £5,000 dividend allowance outweighs the loss of tax credit until this point. The break-even point for additional rate taxpayers is £25,400.

However, those most likely to feel the impact of the new regime are directors and shareholders of small companies. For them, it has historically been tax efficient to extract funds from a company using a combination of modest salary and the balance in dividends; the effective rate on dividends extracted is currently 0% / 25% / 30.56% for basic, higher and additional rate taxpayers respectively. Each of these income bandings is likely to experience higher levels of tax on their business income.

For more information on the HMRC Changes to Dividends from April 2016, contact Omni Chartered Accountants on 01902 837 408 for free of charge, practical advice.


Bank of England February 2016 Inflation Report Summary

Bank of England February 2016 Inflation Report Summary , accountancy advice, UK tax advice, free tax advice, free company advice, changing from sole trader to limited company, how do I change from sole trader to limited company, limited company advice, forming a limited company, changing from sole trader, sole trader advice
This report is courtesy of the Black Country Chamber of Commerce.

Bank of England February Report significant points:

  • There has been a softening of UK growth forecasts from 2.5% to 2.2%
  • Spare capacity in UK is 0.3% of GDP and unemployment is below 5%, which leaves little room for manoeuvre within the current downturn – this may lead to price pressure
  • A corporate cash balances are high (lessons learned from the recession) and because lending from the non-banking sector has grown, any issues within the financial sector are not expected to have a catastrophic effect on a globally resilient UK
  • Global growth outlooks are fuelling the 7% drop in equity; growth expectations amongst emerging economies have dropped significantly as a result of the drop in commodity prices (Less investment and bank lending tightening). Growth expectations in advanced economies has risen (where 75% of our exports go to)
  • Oversupply is the reason why the oil prices are dropping. Some commentators are expecting prices to drop to $10 a barrel
  • Productivity in the UK is rising but more business investment is required to consolidate

Click here to view the full Bank of England February 2016 Inflation Report.

We will continue to keep you updated with all of the latest financial and accounting news and hope that you have found our Bank of England February 2016 Inflation Report Summary useful.

Follow us on Twitter @OmnitasTax and like our Facebook page – we are happy to help with any queries that you may have.

If you require any tax or general accounting advice, feel free to call us on 01902 837 408 or you can request a free of charge call-back from our website.


When should I switch from sole trader to limited?

When should I switch from sole trader to limitedYour business may benefit from being set up as a limited company from the outset.

Alternatively, you can change from a sole trader business to a limited company structure when your business is established and begins to grow.

Your company can be registered with just one person, or you can set up a company with multiple shareholders and directors – it is a very flexible business structure.

The three principal reasons to trade as a limited company are:

  1. Limited liability
  2. Tax efficiency
  3. Status

1. Limited Liability

The biggest benefit of running a business as a limited company is limited liability. If a company runs into financial difficulty, the personal finances and assets of the shareholders are protected beyond the value of their shares. So, if your company is unable to pay its creditors, you will only have to contribute the nominal value of the shares you hold – this could be as little as £1.

Limited liability is crucial if you plan to provide high value supply or services that could potentially lead to liability claims. If any such situation should arise, your personal finances and possessions are protected – this is not the case for sole traders.

2. Tax Efficiency

Limited companies offer greater flexibility and more opportunities when it comes to the taxation of profits and personal income – company profits are liable for Corporation Tax of 20% for the first £300,000, and 21% for profits above £1,500,000. As a comparison, sole traders are charged 20% Income Tax on profits up to £31,865; 40% between £31,868 – £150,000; and 45% on profits exceeding £150,000.

It is also easier for directors to keep their income below higher bands by taking a combination of a salary and dividends – this means less money goes to HMRC and more money is available to reinvest in the company or distribute to directors and shareholders. There is no such tax-saving strategy for sole traders.

3. Status

Limited status can boost the perceived value of a business by creating a professional, corporate image.

Many industries and corporations are more likely to do business with limited companies, rather than sole traders, because they are considered more established, committed, and credible. Limited liability also gives certain industry professions a sense of security when choosing to invest or use the services of a new business.

There are greater accounting requirements and administration costs associated with running a limited company, all of which require more time and attention; however, the financial and professional gains often counter these perceived pitfalls.

When should I switch from sole trader to limited?

If you aren’t sure about the answer, don’t worry – we are here to help and guide you. Request a free of charge call-back from our website today or click here to submit an online enquiry.