MPower Accounting

MTD for Income Tax Is Here: What It Means for You

Mon, 13 Apr 2026 19:27:18 GMT

HMRC’s new system Making Tax Digital for Income Tax Self-Assessment has now arrived! This isn’t just a regulatory update. It’s a shift in how your records are kept, how often you report, and what you will need to do throughout the year.

What’s changing for you:

Under MTD for Income Tax, if you’re a sole trader or landlord within scope:

You’ll need to keep digital records
Quarterly updates will need to be digitally submitted to HMRC
An End of Period Statement (EOPS) will need to filed
A Final Declaration will be needed to finalise your tax position for the year

In short: instead of one annual deadline, your tax reporting becomes a year-round process.

Why using compliant bookkeeping software is now essential?

To meet MTD requirements, HMRC requires fully digital record keeping and submissions .

Manual spreadsheets alone are no longer sufficient
You’ll need to use MTD-compliant bookkeeping software
Sending your accountant paper records or incomplete information will cause delays

The upside (it’s not just compliance)

While MTD is mandatory, it also brings real benefits:

Clear visibility of your tax position throughout the year
Better cash flow planning
Fewer surprises at year-end

What support do you need to navigate this new system?

The support of qualified accounting professionals is now more necessary than ever. We don’t expect you to navigate this alone and here’s how MPower Accounting can ensure that you not only comply with, but thrive under, this new reporting requirement.

We’ll help you choose and set up the right software

We work with trusted platforms such as Xero, QuickBooks, FreeAgent and others. We’ll recommend what fits your business best and get everything set up correctly.

We’ll ensure you stay compliant

Review your records regularly
Submit your quarterly updates accurately and on time
Handle all year-end submissions

We’ll take the stress off your shoulders

With the right system in place:

Your records stay up to date automatically
We can spot issues early
You avoid last-minute pressure and surprises

All we’ll need from you to make MTD work smoothly, is access to your chosen bookkeeping software, regular uploaded receipts so we can keep records current and a little of your time when there are questions. The more up-to-date your records are, the more value and proactive advice, we can provide.

Your role is simple but important. Letting us take the strain of compliance will save you time and cause significantly less stress, enabling you to focus on what is important, that is running your business successfully.

Next steps

If you haven’t already:

Speak to us about getting set up on MTD-compliant software
Let us review your current bookkeeping process
Make sure you’re ready for quarterly reporting

Why Cheap, Outsourced Bookkeeping Could Cost Your Business More

Tue, 24 Mar 2026 16:34:34 GMT

When choosing an accountant, it’s natural to be drawn to lower fees. However, if your accountant outsources bookkeeping, especially overseas, it can lead to hidden risks, poorer service and long-term costs for your business. Here’s what you need to consider:

Service Quality May Be Lower

Higher risk of errors, misclassified transactions, and inaccurate reports
Bookkeeping completed less regularly, usually only at key deadlines, eg, VAT quarter
No dedicated bookkeeper which can be contacted

Less Ongoing Support

Little to no ongoing support from UK based accountant
Less control and oversight from your accountant
Slow response to queries and issues taking longer to resolve

Cheap Fees Can Lead to Higher Costs

You may pay more later to fix errors or redo work

Risk of fines or penalties due to late or incorrect filings
Your time being wasted with identifying errors and chasing a response

Impact on Your Business

Inaccurate financial data makes it harder to make confident decisions
Delays can affect cash flow planning and reporting deadlines
Frustration and lack of trust in your financial information and accountant

What to Look For Instead

Accountants who have UK based in house bookkeepers
Clear communication and quick response times
Consistent, reliable handling of your financial records
Continued support and advice through the whole year

Key Takeaway

The cheapest option isn’t always the best value
Investing in quality bookkeeping saves time, reduces risk, and gives you peace of mind

The MPower team is proudly based in the UK, with every member carefully selected for their expertise and experience. Our role goes beyond simply completing bookkeeping tasks—we provide valuable insights and practical suggestions based on your financial data.

We believe in building strong, partner-like relationships with our clients. That means we’re here for you all year round, whether you have a quick query or need deeper insight from your numbers to support better business decisions.

We have welcomed many new clients to our portfolio who, initially enticed by the cheaper rate, have become disillusioned and disappointed with their existing out-sourcing accountants. Understanding that cheap is not the best option, they have thrived with the support and availability our team provide. Choosing the right accountant is about more than price, it’s about ensuring your business has accurate, timely financial information you can depend on and the support of an accountant who is readily available, at any time of the year.

This is the service that MPower strives to provide, to any and every client!

New Year Resolutions for a Stronger and more Successful Business

Mon, 05 Jan 2026 10:16:46 GMT

As accountants, January is when we see optimism at its highest and inboxes at their fullest. A new year brings fresh energy, new goals, and the promise that this will be the year that your business really moves forward. But as the month moves on and realities hit, the elation and determination to press on with these new goals starts to fade and often die completely.

The difference between a resolution that sticks and one that doesn’t is simple: clarity , practicality , and consistency . So instead of vague promises like “earn more” or “work less,” here are some realistic New Year’s resolutions that can genuinely help you build a stronger, more sustainable business.

1. Get Clear on Your Numbers (Not Just Your Turnover)

One of the most powerful resolutions you can make is to truly understand your financial position. Turnover alone doesn’t tell the full story. Profit, cash flow, and margins matter far more.

Ask yourself:

Which services or products are most profitable?
Where is cash getting stuck?
What costs could be reduced without harming quality?

Commit to reviewing your numbers monthly, not just at year-end. Confidence grows when decisions are backed by facts, not guesswork.

2. Improve Cash Flow, Not Just Sales

Many businesses fail while still “making money” on paper. Cash flow is the lifeblood of your business.

This year, resolve to:

Invoice promptly and clearly
Review payment terms
Chase overdue payments consistently (and professionally)

Small changes here can dramatically reduce stress and give you more freedom to plan ahead.

3. Price for Value, Not Fear

A common issue I see is business owners under pricing, and resisting rate increases, because they fear losing customers. The result? Long hours, high pressure, and limited reward.

A strong New Year resolution is to:

Review your pricing
Understand your true costs
Charge in line with the value you deliver

The right clients respect fair pricing. Better pricing attracts better clients.

4. Build Systems That Save Time

If everything depends on you or a small team, your business will always feel heavy. Systems create breathing space.

Resolve to:

Document key processes
Automate where possible
Use software to reduce manual tasks

Time saved can be reinvested in growth, strategy, or simply enjoying life outside the business.

5. Invest in Support (You Don’t Have to Do It Alone)

Whether it’s professional advice, bookkeeping support, or mentoring, the most successful business owners know when to ask for help.

This year, consider:

Delegating tasks that drain your energy
Seeking advice before problems escalate
Surrounding yourself with people who both support, and challenge, you

Support isn’t a cost—it’s an investment.

6. Protect Your Energy and Wellbeing

Burnout helps no one. A business that relies on exhaustion is not sustainable.

Make a resolution to:

Set realistic boundaries
Take proper breaks
Define what “success” looks like for you, not just your business

A healthy business owner makes better decisions and builds stronger businesses.

Final Thought

New Year’s resolutions don’t need to be dramatic to be effective. Small, intentional changes, applied consistently, create the biggest impact over time. This year, focus less on perfection and more on progress. Build a business that supports your life, not one that consumes it.

If you’d like help turning your resolutions into practical actions, contact us NOW —it’s one of the smartest business decisions you can make. At MPOWER we work with business owners to provide clear direction from the numbers and strategies for success.

Here’s to a calmer, clearer, and more confident year ahead.

Selling land for development – will I pay tax?

Tue, 28 Oct 2025 09:34:05 GMT

An opportunity to sell some of your land for development can be very tempting but could you land up paying Capital Gains Tax (CGT) on your windfall.

This area of tax is quite niche but knowing the rules could shape what decisions you make and it is important that you fully understand the implications. If Principal Private Residence (PPR) Relief can apply then no CGT will be due but the Revenue may well argue that is doesn’t.

When does PPR apply?

The relevant law is Section 222 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) .
It says you don’t pay CGT on the disposal of a dwelling-house that’s been your main residence and the garden or grounds “up to the permitted area” (normally 0.5 hectares) that’s used for the reasonable enjoyment of the house. That means PPR can apply even if you sell part of your land separately — but only if it was still genuinely part of your residence at the time of disposal.

However, the relief has limits:

The land sold must have been enjoyed as part of the home, not used for business or rented out separately.
The total area (house + garden/grounds) must not exceed 0.5 hectares (about 1.24 acres) unless a larger area is needed for the “reasonable enjoyment” of the home (which HMRC sometimes accepts for rural properties).
The land must not have been sold for development before the house sale unless it clearly remains part of the residence at that time.

If you sell off a piece to a developer before, or separately from, the sale of your home, HMRC can argue it’s a disposal of land and CGT would apply . HMRC’s makes its stance clear with this statement:

“If the owner sells part of the garden or grounds separately from the house, relief will only apply if the land sold formed part of the garden or grounds up to the date of disposal.”

How do I show that the grounds were genuinely part of the garden?

If the land really is part of your garden, you can improve your position by:

Showing continued use — photos, garden maintenance invoices, landscaping, etc.
Avoiding any planning applications yourself before sale.
Selling without fencing or subdividing it beforehand.
Keeping the sale timing close to the eventual house sale (if planned).
Documenting that the sale proceeds were for personal reasons , not part of a development scheme.

What if planning permission is involved?

If you obtain planning permission to sell at a higher value, HMRC is more likely to treat that as a capital gain so CGT will apply.

If you’ve already agreed to sell the land to a developer, HMRC’s case is strong — especially if there’s planning permission or preparation for building. If you simply sold a piece of your garden that you’ve been using as part of your home, with no development activity by you , your case is stronger. However, as most developers insist on getting planning permission before the land is bought this can weaken your case.

What if I’m not covered by PPR Relief?

Then CGT applies on the gain you make from the sale which would be the Sales Proceeds less a portion of the original cost plus allowable expenses.

Let’s look at a practical example:

You bought your home + 1 acre for £400,000 total.
Now you sell ¼ acre for £250,000 to a developer.
You’d need to apportion the original purchase price (£100,000) to that land.
Gain = £250,000 − £100,000 = £150,000.

Then CGT applies at:

18% or 28% (depending on your income tax band),
Less your annual CGT allowance (£3,000 for 2025/26).

You can also deduct legal fees, surveyor’s fees, etc.

In summary:

The key factor is what the land was at the time of sale :

If the sale is made before development starts, and it is still your private garden at the time of sale, PPR applies.
If you had already granted rights, or if it’s no longer used as part of the garden, HMRC could argue it’s no longer part of the residence — but in your case, it’s still part of the garden when sold.

Therefore, the gain should be fully exempt under PPR relief.

Always seek the advice of a professional if you are considering selling land for development so that you are aware of the risks involved and the amount of CGT that may be due if PPR is not applied.

Conducting the sale correctly could be the difference between a hefty tax bill or more of the funds staying in your own bank!

MTD for Self-Assessment – is it time to become a Ltd Company?

Tue, 16 Sep 2025 12:15:07 GMT

With the horizon of Making Tax Digital (MTD) for self-assessment very much on the landscape many small businesses are considering the benefits of incorporating a Limited Company to avoid the rigours of quarterly reporting and the new requirements of six returns being needed every year. There is much to consider when contemplating forming a limited company so let’s have a look at what this means and the benefits and disadvantages of doing so.

Firstly, to understand what Making Taxing Digital means for sole traders please read our previous article at:

https://www.mpoweraccounting.co.uk/how-will-i-be-affected-by-making-tax-digital-for-income-tax-mtd-for-itsa

Is it easy to transfer my business to a Limited Company?

You will need to firstly set up the Limited Company at Companies House. Although this can easily be done online you will need to have made decisions on the following:

What’s my company going to be called?
How much share capital should it have?
Who are the Directors and Owners?
What registered address should I use?
What bank account should I set up for the new Company?
How do I transfer my current business to the Limited Company?

You do need to properly transfer the operations and assets to the newly formed company, you can’t just start trading through it. For this you do need professional advice to ensure it is done properly and doesn’t breach any HMRC guidelines, for example, how you value the business. Another important consideration is having to novate or assign customer, supplier and other contracts (eg, landlord) into the new business.

Are Limited Companies affected by MTD?

Limited Companies are not affected by MTD ITSA because they don’t file a self-Assessment return for trading profits. Instead, they file:

A Corporation Tax return (CT600) once a year to HMRC.
Statutory accounts once a year at Companies House.
Confirmation Statement which again is filed annually at Companies House.
A Personal self-assessment tax return for dividends/salary will still need to be filed if you’re a director-shareholder. This is currently outside the scope of MTD for self-assessments.

If the company is VAT registered these do need to be filed quarterly under the VAT MTD which has been in place for a number of years now.

What are the advantages of incorporating to avoid MTD for self-assessments?

No quarterly MTD submissions unless VAT registered.
Potential tax planning opportunities, e.g. mixing salary and dividends.
Limited liability protection.
Perception of a more credible business.

What are the disadvantages of becoming a Limited Company?

There are additional costs involved with running a Limited Company as the annual returns are more complicated and will require a professional to complete them properly.
A Limited Company is a separate tax entity so the money in it isn’t automatically yours — you need to extract it as salary, dividend, expenses or loan.
If profits are higher than £50 000 the corporation tax rate is 25% but remains at 19% below that threshold. There is marginal relief on the higher tax rate until profits are £250 000.
MTD for Corporation Tax is expected eventually, so incorporation may only delay digital reporting.

What are the Alternatives to incorporation?

If your income will stay below the £30,000 threshold by 2027, you may never need to comply with MTD ITSA.
Even if above the threshold, using cloud accounting software, e.g. Xero , QuickBooks , FreeAgent makes MTD submissions fairly painless — so incorporating purely to avoid MTD may not be the best reason.

Incorporating to avoid MTD for self-assessment may seem like a good option it does come with its own complexities. If your main driver is to just avoid MTD it may not be worth it BUT if you’re already considering incorporating then now is a certainly a good time to do it. There are many positive benefits of being a Limited Company which do outweigh the additional costs especially if you are looking to grow and develop your business.

Do contact us if you have any concerns about MTD for self-assessment or you’d like to discuss the merits of incorporating as we are specialists in both fields.

Identity Verification at Companies House – why is this being introduced and what do I need to do?

Tue, 26 Aug 2025 14:53:01 GMT

Have you ever been a victim of identity fraud? It’s very unpleasant, can cause financial hardship and always causes distress. My own son himself found out that he had been appointed a Director of a bogus Limited Company with no knowledge! I have also included a guide further down as to what to do if you find yourself in this unfortunately situation.

From 18 November 2025 , all company directors and people with significant control (PSCs) will be legally required to verify their identity at Companies House. Its primary aim is to prevent misuse of UK companies, namely fraud, money laundering, illicit financial activity, and concealment of ownership. The requirement helps ensure individuals registered as directors or PSCs (Persons with Significant Control) are genuine, not fictitious or fraudulent identities.

Why are these changes happening?

The new measures are certainly a good safeguard to avoid innocent individuals being taken advantage of. Fraud and false entries have been a persistent problem, including cases of fictional directors like “Darth Vader” or “Santa Claus.” The Identity Verification (IDV) system will help to reduce such abuse. It’s also intended to improve data quality, helping users of the register, such as investors, banks, and regulators, make informed decisions.

The move also fits within global trends of combating shell company abuse and boosting beneficial ownership transparency which does prevent financial crime through identity clarity.

However, it does require some necessary administration in completing the verification Here’s a guide to help you comply:

How to Complete Verification

Two Main Routes:

Directly via Companies House using GOV.UK One Login
Free and online.
Requires a government-issued photo ID (e.g., biometric passport or driving licence), a selfie, or bank statement for identity confirmation.
Through an Authorised Corporate Service Provider (ACSP)
These include accountants, solicitors, formation agents etc., supervised under UK Anti-Money Laundering regulations, and approved by Companies House.
ACSPs conduct the ID check and submit on your behalf.

Once verified, individuals receive a personal code from Companies House, reusable across all company roles.

I have used the first route myself and it was relatively easy and did not take much time.

What If You Don’t Comply?

It will be Illegal to act as a director or PSC without completing verification by the relevant deadline.

Companies may be prevented from filing documents , face financial penalties , director disqualification , and even company dissolution .
Enforcement will include annotations on the register, rejection of filings, and fines.
Some third-party providers are charging between £45–£250, despite the process being quick and free via One Login.

What You Can Do Now

Verify early , especially if you’re a director or PSC. It's quick via GOV.UK One Login.
Confirm your confirmation statement dates , which will determine your deadlines. After 18 November, the Companies House register will show upcoming due dates.
Ensure your company’s registered email is up to date to receive guidance, reminders, and notices from Companies House.

What Can I do if my name has been used fraudulently as a Company Director?

1. Confirm the Details

Check the entry on the Companies House register using their free webcheck service.
Download the filing history and director details to confirm where and how your name has been used.
Note the company number , filing date, and any associated documents.

2. Report the Fraud to Companies House

Email : integrity@companieshouse.gov.uk providing the following details:
Your full name and contact details
The company number and name
Copies/screenshots of the record showing your name
A statement that you have no connection to the company

Companies House has a dedicated team handling such “identity misuse” cases. They can annotate the register to flag the record as potentially fraudulent while they investigate.

3. Report to Action Fraud

Go to Action Fraud (the UK’s national reporting centre for fraud).
File a report of identity theft/corporate identity fraud .
You will get a crime reference number , which may help if you need to dispute financial or credit implications later.

You can take further action such as considering a Protect Statement, protecting yourself against wider identity theft and even seeking legal advice.

MPower is not an ACSP so we can’t conduct the ID check and submit on your behalf. However, we are available to guide you through the process of completing the identity verification at Companies House so please do contact us if you need a helping hand.

Xero Price Increases 1 st September 2025 – how much more will I be charged?

Sun, 10 Aug 2025 10:09:35 GMT

Now you can be excused if you’ve missed the announcement of the latest price increases by Xero. Apart from a rather low key “Pricing Update” notice and customer emails there has been little else published on the internet explaining the latest round of increases in the Xero Plans. So, here’s your opportunity to understand how Xero’s recent update will impact the plan you are on.

*Not including VAT

Xero attribute the increases to the continued investment in the platform, making it more reliable, secure and useful. These improvements are designed to give bu siness owners the ability to run their organisations more efficiently while improving the overall user experience and providing better support to clients’ evolving needs.

Price increases, though never welcome, are inevitable when running a business. They should be expected, anticipated and seen as an opportunity review the current service being provided. In terms of Xero, questions such as “am I on the right plan?” or “is this the right bookkeeping product for me?” should be asked. Making changes can seem daunting but also can lead to more effective bookkeeping as well as providing significant savings.

There are many bookkeeping products on the market with the Xero, Quickbooks, Freeagent and Sage being the top four. Other systems are available and new providers are coming into the market all the time with good offerings. In an ever-developing market it is important to keep aware of what is available and be willing to change to another system if it is going to be more appropriate to your business.

At MPower we use all the major bookkeeping software and have a very good understanding of their strengths, weaknesses and fit to individual business needs. If you’re not sure whether Xero is still the right system for you do contact us to discuss your requirements from your bookkeeping platform and we will be able to guide you.

What is HMRC’s Payment on Account System for Self-Assessment and how does it affect me?

Wed, 09 Jul 2025 08:23:59 GMT

With many tax payers facing yet another payment to the HMRC on the 31st July let’s answer some frequently asked questions about the Payments on Account System.

When was this system first introduced?

The Payments on Account system was introduced in the 1996–97 tax year , as part of the Self-Assessment overhaul. Before then, HMRC had a fragmented and less predictable system for collecting income tax from self-employed individuals and others outside the PAYE system. It was introduced to ensure that taxpayers pay tax closer to when they earn their income , rather than facing a large lump sum payment long after the end of the tax year.

Why did HMRC introduce Payments on Account?

There are three key reasons why HMRC introduced this system:

Cash flow for HMRC : This undoubtably is a driving reason for Payments on Account as it spreads the inflow of tax revenue more evenly throughout the year rather than relying on one big payment annually after a tax demand was sent to the tax payer.
Encourages prompt payment : Tax is collected in advance (based on the prior year’s bill), reducing the risk of default or late payments.
Helps tax-payers budget : Although first going into the Payment on Account system is painful as your tax bill, and half of it again, need to be paid on 31st January. Once in though, it does avoid the shock of a large single tax bill by splitting the liability into two smaller payments.

So how does the Payments on Account system work?

Who Needs to Make Payments on Account?

You’ll need to make payments on account if your tax bill is more than £1,000 and less than 80% of your tax is collected at source (e.g., via PAYE).

When Are Payments on Account Due?

There are two payments each year:

31 January – First payment on account for the current tax year
31 July – Second payment on account for the current tax year

Each is 50% of your previous year’s tax bill (excluding Class 2 NICs and student loan repayments).

Example:

Let’s say your tax bill for the 2023/24 tax year is £6,000 .

On 31 January 2025 :
You pay the £6,000 balance for 2023/24
Plus a £3,000 payment on account for 2024/25 (50% of £6,000)
On 31 July 2025 :
You pay another £3,000 as the second payment on account for 2024/25

So by July 2025, you've prepaid £6,000 towards your 2024/25 tax bill.

What Happens When You File Your Next Tax Return?

When you submit your 2024/25 return:

If the actual tax bill is £7,000 , you’ve already paid £6,000 , so you owe £1,000 by 31 January 2026.
If it’s only £5,000 , you’ve overpaid and can get a £1,000 refund or offset it against future payments.
If the bill is £7,000 your tax payment will be:
on 31st January 26 £1,000 balance on the 2024/25 return bill AND half of the £7,000 (£3 500) balancing payment so £4,500 in total.
£3,500 balancing payment on the 31st July 26.

Can You Reduce Payments on Account?

Yes you can.

If you expect your income to fall, you can apply to reduce them through your HMRC online account or on the paper form SA303. But if you reduce them too much, HMRC may charge interest on the underpaid amount.

Will Making Tax Digital for Self-assessment change the Payments on Account System?

The short answer is No! The longer answer is watch this space!! Many of us professionals believe that with quarterly reporting, quarterly paying will soon follow! For more information on Making Tax Digital for Self-assessment please see our article at:

https://www.mpoweraccounting.co.uk/how-will-i-be-affected-by-making-tax-digital-for-income-tax-mtd-for-itsa

The Payment on Account system often causes much confusion with self-assessment tax payers. At MPower Accounting we are used to helping our clients understand when payments need to be made and how they have been calculated. As an added service we will always send a payment reminder to clients early in July so they are not caught out. We are also delighted to work with clients who want to complete their self-assessment tax returns early to determine if they are able to reduce the July Payment on Account.

Do contact us if you’d like help with Payments on Account and anything to do with your self-assessment

From Corporate Finance to Business Owner

Thu, 05 Jun 2025 20:39:39 GMT

The Power of Mentorship in Tracy Bland’s Success

I’m thrilled to share the story of one of my incredible mentees, Tracy Bland . Her journey from corporate finance to building her own thriving bookkeeping practice is truly inspiring and a testament to how the right guidance can turn a vision into reality.

Tracy’s story was first shared by Ideal Schools in this original blog post . They gave her the best start, supporting her through studying for and passing her exams.

But the learning journey does not end with qualification, in fact it just begins! She instantly recognised the advantage that my guidance would give her through the six month structured MPower Mentoring program.

Why Did Tracy Bland Change Careers?

After two decades working in corporate finance across various manufacturing industries and even the NHS, Tracy realised she needed more flexibility to support her family. The corporate world, with its constant travel and weekend demands just didn’t work anymore.

She explored many options, including selling kitchens, before discovering that setting up her own bookkeeping practice was the best career path forward. This offered the ideal balance: meaningful work, flexible hours, and a chance to make a real difference.

Knowing your WHY is the first essential step in your success.

What were Tracy’s first steps in making her vision a reality

Retraining with Ideal Schools and choosing the ICB route gave Tracy the tools and confidence to launch Brigg Bookkeeping Ltd . Starting a business from scratch isn’t easy but Tracy had the determination and willingness to learn which, with the right guidance, would guarantee success.

Reaching out for help is essential for your development.

How Did Mentorship with Paula Veysey-Smith Support Tracy’s Business?

When Tracy reached out to me for mentorship, she was ready to take her business to the next level. Together, we worked on taking Tracy’s vision to reality by:

From her vision setting realistic and achievable goals in line with her lifestyle
Helping Tracy to more fully understand herself and unlock her true potential
Building a solid platform to drive her business forward
Guiding Tracy to find her own answers

Being part of this journey with Tracy growing the practice that she had dreamed about, has been a real joy. This truly shows the rewards that a mentoring relationship can have for both the mentor and mentee.

As Tracy says, “It’s about keeping things smart, your guidance has helped me keep my practice sleek and focused on my clients’ needs.”

Being willing to act will make the difference in seeking out your success.

Why is Mentorship Important for Bookkeepers and Small Business Owners?

Tracy’s story shows that mentorship can make a real difference. With the right support, you can build a business that works for you—balancing your personal and professional life.

Whether you’re looking to start your own practice or grow an existing one, I’d love to help. For a limited time period I’m currently offering a free taster mentoring session for anyone who’s ready to take the next step

Book your free session here

Turn your vision into a thriving and successful business just like Tracy did.

Together, we can step into your success.

Working from Home Expenses You Can Claim in 2025–26

Thu, 22 May 2025 12:35:38 GMT

Do you work from home? If you do, either full-time or part-time, you may be eligible to claim certain expenses either against your own taxes or your Limited Company ones. Many factors will determine what you can claim such as working location, employment status (employee, self-employed, company director), and how much of your home is used for work.

What can I claim as an employee of a company?

You can claim:

A flat-rate allowance of £6 per week (or £26 per month) without needing to provide evidence of expenses. This is the simplest method and can be claimed via your tax code or tax return.

The actual costs (if you don't use the flat rate) which can include a proportion of the following:

Heating and electricity
Internet and phone bills
Water (if it’s metered and usage is clearly work-related)

You cannot claim rent or mortgage interest unless you're self-employed.

These expenses can be claimed via HMRC’s online portal if they have not already been reimbursed by your employer!

What can I claim if self-employed (sole trader or via a Partnership)?

Here you have two options:

1. Simplified Expenses (Flat Rate)

Based on hours you work from home each month:

25–50 hours/month → £10/month
51–100 hours/month → £18/month
101+ hours/month → £26/month

2. Actual Expenses Method

You can claim a proportion of:

Rent or mortgage interest (not capital repayments)
Utilities (gas, electricity, water)
Council tax
Internet and phone
Cleaning and maintenance
Home insurance (if work-related)

You’ll need to work out the percentage of your home used for business, usually by the number of rooms (not including bathrooms, corridors, storage space) or square footage.

One word of warning is never claim the whole use of a room for business as every room will have duality in use. This is also important if you own your home as a room declared purely an office could attract Capital Gains Tax when the property is sold. We suggest that any room should only be claimed at 90% for business. And only one room can be used, not a multiple!

These costs should be included on your Self-Assessment tax return.

Can I make a claim for these expenses in my Limited Company?

Yes, you most certainly can.

At MPower Accounting we not only recommend using the actual expenses method as set out above, we provide our clients with a bespoke spreadsheet to calculate these expenses, and others such as mileage, on a month-by-month basis. These amounts can then be claimed as expenses to the Company and paid out to you. It is one of the tax efficient methods of taking money from your business.

Capturing and calculating monthly your regular working from home expenses is the best way of ensuring they are recorded correctly. To help you do this we are offering a free download of the spreadsheet usually only available to our clients; please use the link below to get this.

Paying taxes is a necessary evil but I am a firm believer in minimising this liability for both individuals and companies. Correctly claiming working at home expenses is one way to reduce your tax bill. Please do contact us if we can help you further identifying all the expenses you can claim and also for further assistance in how to correctly use and populate the downloaded template.

Download the Free MPower Expenses Template

Track your working-from-home costs like a pro.

This simple, client-approved spreadsheet helps you record monthly expenses for utilities, broadband, and more — making tax claims easier and more accurate.

Photo by Tai Bui on Unsplash

Tax Efficient Salary for Directors in 2025-26

Mon, 28 Apr 2025 11:49:46 GMT

Key changes in Employer National Insurance (NI) rates and thresholds for the 2025-26 year have meant advice on the tax efficient salary for Directors has significant altered.

The changes that took effect from 6th April 2025 are:

Employer's NI Rate Increase from 13.8% to 15%
Employer's NI Threshold Reduction from £9,100 to £5,000 per annum
Employment Allowance Increase from £5,000 to £10,500 per company

For the 2025-26 tax year, determining the most tax-efficient salary for Company Directors depends on a number of factors with your company's eligibility for the Employment Allowance being the most significant.

For Single Directors where the Employment Allowance can’t be applied the most tax efficient salary is now set at £12,570 pa (£1,047.50 pm). Although this salary will incur employer’s NI of £1,135.50 pa, the association corporation tax savings will outweigh this cost. Please see below:

Salary: £12,570

Employer NI: £1,135.50

Total costs allowable for Corporation Tax: £13,705.50

Corporation Tax relief at 19% of £13,705.50 = £2,604.05 less £1,135.50 NI = £1,468.55 represents the savings in CT after the NI cost .

The other salary option is £6,500 per annum which still qualifies for the state pension but will attract Employers NI contributions of £225 on the £1 500 above the £5 000 threshold. The solution above is better as the savings are greater but we would recommend this option if the company wasn’t performing well. The workings are below:

Salary: £6,500

Employer NI: £225

Total costs allowable for Corporation Tax: £6,725

Corporation Tax relief at 19% of £6,725 = £1,277.50 less £225 NI giving tax credit of £1,052.75 .

The benefits are only increased if your company pays tax at 25%.

A final option is to only pay £5 000 per year to avoid any HMRC payments but this does mean there are no contributions at all towards pension; although it is the simplest of the three to administer we do not recommend this option due to the lack of qualification for pension contributions.

Employment Allowance Eligibility

Most companies with two or more employees or directors earning above the Secondary Threshold (£5,000) qualify for the Employment Allowance, which can offset up to £10,500 of Employer's NI contributions.

This will also make the £12,570 salary option more attractive, as the Employer's NI can be fully covered by the allowance.

Other company and personal circumstances can impact these calculations so it is always best to seek the advice of a professional. At MPower Accounting we have a dedicated payroll bureau to give our clients the best advice on their personal situation.

Please contact us if you need further assistance in understanding what is the best salary for you.

How will I be affected by Making Tax Digital for Income Tax (MTD for ITSA)?

Sun, 23 Mar 2025 10:36:53 GMT

HMRC are starting to send out letters to sole traders and landlords in the initial steps towards Making Tax Digital for Income Tax. If you receive one of these letters do not panic, help is at hand. So let’s answer your most asked questions about Making Tax Digital.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax (MTD for ITSA) is a UK government initiative aimed at modernising the tax system. It will require individuals and businesses to keep digital records and submit tax information to HMRC using compatible software. It is part of a broader initiative to digitalise tax returns and follows on from the changes already implemented for VAT reporting.

Will Making Tax Digital affect me?

MTD for ITSA will affect individuals who:

Are self-employed (e.g. sole traders) and/or landlords (earning income from property).
Have a total income over £50,000 per year (combined from self-employment and property).
Are currently required to complete a Self-Assessment tax return.

From April 2026 , MTD for ITSA will be mandatory for those earning over £50,000.

From April 2027 , this threshold will reduce to £30,000.

What will I have to do if my earnings are over the threshold?

You will need to keep digital records for income and expenses which will mean using MTD compatible software. This will be a major change for those of you still keeping paper records.

Instead of submitting an annual self-assessment return you will need to submit quarterly updates 4 times a year to HMRC. At the end of the tax year an End of Period Statement (EPOS) and a Final Declaration will need to be submitted which essentially replaces the current Self-assessment return. All of these will be required digitally, paper records and manual calculations will no longer be accepted.

This means that instead of 1 annual return you will need to make 6 submissions!

So what software do I need to use to keep digital records?

Acceptable software include:

QuickBooks
Xero
FreeAgent
Sage
or, HMRC-recognised spreadsheet tools with bridging software ( not highly recommended )

No more shoeboxes of receipts or manual books — everything must be digitally recorded.

When will I need to register for MTD?

You’ll need to sign up for MTD for ITSA before April 2026 . This is a deadline and not a target, signing up early is always advisable. HMRC will provide a service for you to do this but having the guiding hand of an accountant will make this a much easier task.

MPower Accounting is that help at hand for you!

We already have a sound understanding of Making Tax Digital and use all the acceptable software mentioned above. We realise that for many the prospect of MTD , keeping records digitally and having to make 6 submissions a year is daunting, if not downright scary. Let us be that helping hand and guide you through the process of registering for MTD and setting up your digital records to make those 6 submissions seem effortless.

Give us a call to discuss on  01892 234353 

or email us here:  welcome@mpoweraccounting.com 

Understanding UK Tax Codes: A Complete Guide

Thu, 13 Feb 2025 10:41:47 GMT

What are these jumbles of letters and numbers?

When you start a new job, receive a pension, or change employment, you’ll likely notice a tax code on your payslip. Although, to many, this code looks like a random combination of letters and numbers it is actually the crucial piece of information that determines how much tax is deducted from your income. Understanding your tax code will empower you to check that you’re paying the correct amount of tax and, if necessary, correct the code with HMRC.

What is a Tax Code?

A tax code is used by your employer or pension provider to calculate how much income tax to deduct from your pay or pension. It’s based on your Personal Allowance (the amount you can earn tax-free each year) and any other factors that affect your tax situation, such as additional income or benefits.

For the 2024/25 tax year, the standard Personal Allowance is £12,570 and will remain at this level for the 2025/6 tax year. This means most people can earn up to this amount without paying income tax.

Common UK Tax Codes and Their Meanings

Common codes can be broken down into three main categories:

Standard Tax Codes

1257L: This is the most common tax code for people with one job or pension. It reflects the standard Personal Allowance of £12,570.
BR: Stands for Basic Rate (20%). This code is used when all your income from this employment or pension is taxed at the basic rate, usually because you have more than one job or pension and the Personal Allowance has already been used up.
D0: This means all your income is taxed at the higher rate (40%).
D1: This code applies when all your income is taxed at the additional rate (45%).
0T: Used when your Personal Allowance has been used up, and all your income is taxable. Although similar to BR this code applies to all tax rates (20%, 40% & 45%).

Emergency Tax Codes

The term ‘Emergency Tax Code’ is often misunderstood. This code is most often used when HMRC does not have the information to calculate the correct tax code for an individual and should be corrected when the information does become available.

Usually the code 1257L W1/ M1 is used which means that the Personal Allowance is being applied. The main difference is that tax is calculated on a weekly (W1) or monthly (M1) basis rather than cumulatively. You would most usually see this if you’ve started a new job and your previous tax details are not yet available

0T W1/M1 is another emergency tax code but this means that no Personal Allowance is being applied, leading to higher tax deductions.

Worldwide and Non-Resident Tax Codes

NT: No tax is deducted from your income. This is usually for non-UK residents or people with special tax arrangements.
K: This code is used when untaxed income (e.g., state benefits or company benefits) exceeds your Personal Allowance, meaning additional tax is due.
If your tax code begins with an S then it is a Scottish code and similarly if it is a Welsh code it will begin with a C .

Other Special Tax Codes

There are a number of letters that may also be applied to a tax code:

T: Used when HMRC needs to review your tax code (e.g., for complex tax situations or multiple income sources).
Y: For people born before 6 April 1938 who qualify for a higher Personal Allowance.
L: Indicates entitlement to the basic Personal Allowance.
M: Given to someone receiving the Marriage Allowance from their spouse.
N: Given to someone transferring part of their Personal Allowance to their spouse.

How to Check and Change Your Tax Code

Your tax code will appear on your payslip, P60, or P45. If you think your tax code is incorrect, you can:

Check Online: Log into your personal tax account on the HMRC website .
Contact HMRC: Call HMRC to request a review or correction.
Seek Professional Advice: If you’re unsure, a tax advisor can help you navigate your tax situation.

Why Understanding Your Tax Code Matters

Getting your tax code right is essential to ensure you’re not overpaying or underpaying tax. An incorrect tax code could lead to an unexpected tax bill or a delay in receiving a refund. By understanding your tax code, you can take control of your finances and avoid unnecessary stress.

Need Help with Your Tax Code or Finances?

Tax codes can be confusing, especially if you have multiple income sources or complex financial arrangements. At MPower Accounting, we’re here to help! Our team of experts can guide you through your tax obligations, ensure your tax code is correct, and help you maximise your income.

Contact MPower Accounting today for personalised advice and support. Let us take the stress out of tax so you can focus on what matters most.

Sources:

HMRC (HM Revenue & Customs):
Tax Codes Overview: HMRC Tax Codes Guide
Personal Allowance and Tax Codes: HMRC Personal Allowance
Emergency Tax Codes: HMRC Emergency Tax
Marriage Allowance: HMRC Marriage Allowance
K Tax Code: HMRC K Code
Non-Resident and NT Code: HMRC Non-Resident Tax
Scottish Government:
Scottish Tax Codes and Rates: Scottish Income Tax
S Prefix Tax Codes: Scottish Tax Codes
Welsh Government:
Welsh Tax Codes and Rates: Welsh Income Tax
C Prefix Tax Codes: Welsh Tax Codes
General Tax Information:
Understanding Tax Codes: Money Advice Service - Tax Codes
Tax Codes for Multiple Jobs: HMRC Multiple Jobs

Bank of England Cuts Interest Rates and Slashes Growth Forecast: What It Means for Small Businesses

Fri, 07 Feb 2025 14:13:20 GMT

The Bank of England has halved its growth forecast for 2025 as it reduced interest rates to their lowest level in over 18 months.

The UK economy is now expected to grow by 0.75% in 2025, down from the previous estimate of 1.5%. Despite this downgrade, Bank of England Governor Andrew Bailey expects a "pick-up" in growth, though he emphasised the need for gradual and careful rate cuts due to economic uncertainties.

The latest interest rate cut—from 4.75% to 4.5%—signals the Bank’s continued efforts to stimulate economic activity while managing inflation risks.

What This Means for Small Businesses in the UK

For small businesses, the interest rate cut and lower growth forecast have both benefits and challenges:

Positive Impacts

Lower Borrowing Costs: Businesses relying on loans, credit, or overdrafts may see slightly reduced repayment costs. This could help with cash flow and investment decisions.
Potential Increase in Consumer Spending: Lower interest rates might encourage consumer borrowing and spending, benefiting sectors like retail, hospitality, and services.
Reduced Mortgage Payments for Business Owners: Many small business owners with tracker or variable-rate mortgages could see a slight drop in their monthly payments, potentially freeing up more funds.

Negative Impacts

Slow Economic Growth (0.75% instead of 1.5%): Businesses might experience reduced demand and slower revenue growth due to weaker economic conditions.
Rising Employment Costs from April 2025: The increase in employers' National Insurance contributions could make hiring more expensive, discouraging expansion and investment.
Inflation Expected to Rise (3.7%): Higher energy and water bills will increase business operating costs, especially for energy-intensive industries.
Lower Confidence & Uncertainty: Businesses may hesitate to invest or expand due to economic instability.

The Mortgage Impact: Who Benefits?

Tracker Mortgage Holders: Around 629,000 homeowners with tracker mortgages will see an estimated £29 reduction in monthly payments.
Standard Variable Rate (SVR) Holders: Nearly 700,000 people on SVRs must wait to see if their lenders adjust rates accordingly.
Fixed-Rate Mortgage Holders: No immediate change, but they may find better deals when renewing.
Savers: Those relying on savings for income, such as retirees, may see lower returns on savings accounts.

What Next? The Government’s Response

Prime Minister Sir Keir Starmer emphasised the need to "turn the economy around" with a focus on infrastructure, planning, and nuclear energy. However, businesses remain concerned about higher employment costs and stagnant growth.

Chancellor Rachel Reeves has introduced measures to stimulate the economy, but critics argue that the employer National Insurance hike will increase costs for businesses, making it harder to invest or hire staff.

Shadow Chancellor Mel Stride warned that while rate cuts are good news for families and businesses, the government’s "disastrous Budget" could limit further rate cuts this year.

Take Control of Your Finances with MPower Accounting

With rising business costs, inflation concerns, and economic uncertainty, small businesses need strategic financial planning now more than ever.

Mpower Accounting specialises in helping small businesses across London, Kent, and Sussex navigate financial challenges. Whether you need help managing rising payroll costs, improving cash flow, or planning for tax efficiency, Mpower Accounting has you covered.

How MPower Accounting Can Help Your Business

Optimise payroll & plan for the National Insurance hike
Improve cash flow management to navigate economic shifts
Access expert financial advice to make smarter business decisions
Prepare for tax changes & ensure compliance

Book a consultation today and get expert support tailored to your business!

Stay ahead of economic changes with the right accounting partner.

Photo by Tim Mossholder on Unsplash

Does completing your Self-assessment feel like a rerun of a childhood favourite TV series?!

Fri, 24 Jan 2025 17:24:13 GMT

Self-assessment tax, between navigating tax codes, understanding what to include, allowable expenses, and the deadlines, it’s easy to feel like you’re spinning in circles with no clear direction, a bit like being on a Magic Roundabout! Well with that in mind I’ll hand over to some much loved characters to explain more...

On a sunny day in Tax Meadows, Dougal the dog, Florence, Zebedee, and the gang gathered around to talk about a magical thing called Self-Assessment .

Boing went Zebedee and said, "Self-Assessment is telling the Tax Gardeners at HMRC about how many seeds you’ve made from the lovely flowers in our magic meadow. If you’ve made more seeds that you planted you have to pay some of them back to them to keep the meadow looking lovely!”

Young Florence, who didn’t know much about the Tax Gardeners also asked, "and who has to tell them, don’t they know already?"

Zebedee nodded wisely. “If you have a job, your employer will tell them but if you’re like Ermintrude the cow, selling flowers at the market, or Brian the snail, renting out your shell as a holiday home, you need to do tell them about all the income you earn!”

Dougal wagged his tail, “When do we have to send it to the Tax Gardeners?” Boing went Zebedee, as he couldn’t contain his excitement at being the Tax Gardeners expert.

“You must file by 31st January and pay the seeds you owe them or they might start blowing dandelion fluff everywhere and we don’t want that!

“Yes, don’t be late," warned Ermintrude, "or they'll send Soldier Sam with a nasty letter!" Zebedee looked put out that she had butted in and his spring, for once, didn’t boing! Ermintrude continued, pleased to have something better to do than chew the flower in her mouth!

“First, there’s the arrival of a £100 fine —a little like an unexpected boing from Zebedee, but far less delightful. This fine appears whether or not you owe any tax. If you dawdle for three months, you’ll meet another twisty challenge. Now it’s £10 per day , up to a maximum of £900, like being chased, if rather slowly, around the roundabout endlessly by Brian. After six months, an extra 5% of tax owed (or £300, whichever is greater) is added to the dandelion mix.”

The sun had started to set, Florence smiled and said, "So, Self-Assessment isn’t scary—it’s just about telling the Tax Gardeners the truth and helping the meadow thrive!"

"Exactly!" Zebedee laughed. “Be a Brian, start off early, take it slow but steady and you’ll get there in plenty of time.

Boing when Zebedee one last time, “Time for bed and tomorrow we’ll work on keeping our meadow blooming!”

I hope you enjoyed our visit to the Magic Roundabout, a fun look at Self-assessment tax. If you haven’t been a Brian please do contact us now and we can wave our magic wand to make your self assessment return go away!

Image Credit: My Childhood Memories / Alamy Stock Photo

The Christmas Party – does The Revenue enjoy the fun or ruin the party?

Mon, 09 Dec 2024 10:07:36 GMT

The season of peace and goodwill is well and truly upon us! And for many this heralds that most joyous of events, the staff Christmas party!! Apparently the most popular day for this event is the Thursday of the second week of December, who knew?

Drinks and meals out are the usual staff treat, some with a twist such as themed events or dance and karaoke nights. Some of my clients have been more adventurous in their offering with my personal favourite being a class in natural life drawing! Fortunately it was a mild December.

Whatever the event there are some simple rules that need to be followed to ensure that The Revenue will join in the fun with you.

HMRC allows businesses to spend up to £150 per head per year on staff events, including a Christmas party. This allowance is an exemption , not a relief . If you exceed the £150 per head limit, the entire amount becomes taxable, not just the excess . Now to be totally clear, this limit does include VAT and applies to the total cost of the event, including venue hire, food, drinks, entertainment, accommodation, and transport. This £150 per head allowance applies across all staff events in a single tax year and if you hold multiple events, e.g., a summer barbeque and a Christmas party, the combined cost per head must not exceed £150. Finally, any events held do have to be open to all members of staff, whether you like them or not!

If you are really generous you may also want to give Christmas gifts to your team. HMRC will allow you to do this without tax or national insurance implications if they can be deemed trivial benefits. To do this they must cost £50 or less and not be part of their contract or a reward scheme. Bottles of wine, boxes of chocolates and in the case of my adventurous client, a set of crayons, are all perfectly acceptable.

Do the revenue enter into the Christmas spirit?

They do in part but their Secret Santa stocking isn’t overflowing and any gifts they give can be taken back if the rules aren’t followed. To keep Scrooge at bay it is essential to keep accurate records showing that you have understood and properly followed the guidelines.

So I hope that whatever Christmas treat you have planned for you and your team it is a fabulous festive celebration. And don’t forget to lift a glass to thank the HMRC for being more Santa’s little elf helpers rather than the full on Scrooge!

Wishing you all a Happy Christmas and a very prosperous New Year.

Labour’s big budget – is it boom, bust or just a load of old baloney?

Fri, 01 Nov 2024 15:51:08 GMT

Most of you will probably think the latter. If you are an employee, you’ll probably be pleased that you’re going to have the same take home pay as you did before the budget so why worry about the rest?

Well, you should because your hard-earned money is not going to be worth as much going forward due to this budget. So rather than the usual budget round up lets dig deeper into the impact on us all of the increase in Employers National Insurance rate .

Although all businesses will be impacted by this measure it is the smaller ones that will feel the greatest effect. Small businesses are heralded as the backbone of our economy. Small and Medium Enterprises (SME’S) make up 99% of all UK businesses, employ 61% of total employees and produce a combined turnover of £2.4 trillion. I work with owners of such enterprises and they are the hardest working people I know. Running a small business can be very rewarding personally but often not financially. It is simply a myth that owners of SME’s sit back and enjoy the profits of others labours; most are working long hours every day just to make ends meet.

The rise in National Insurance Contributions, arguable the biggest measure in the budget, will have a devastating effect on this the backbone of our economy. An increase in the rate to 15% coupled with the lowering of the threshold when it is paid to £5, 000 is forecast to generate £20 billion in tax revenue. Yes, the allowance every business receives before contributions are payable has increased to £10, 500 but really this is just a small drop in the growing ocean of the tax burden. The additional cost to a small business of this measure alone will be enough to push some owners to call it a day and close their doors. That will be a hard blow for some of those 61% employed workers affected by company closures; it won’t matter what was on their payslip as they no longer will receive one.

Business closure is just one impact from this increase. This measure is a tax on jobs, on working people, absolutely guaranteeing lower wages and higher prices. Tax and employee national insurance contributions may not have increased on the payslip but the amount of money any worker receives will be worth less going forward. The Office for Budget Responsibility (OBR) have already forecasted that 76% of the increase in Employers National Insurance will be passed on to everyday people through lower real wages, a combination of pay freezes/cuts and increased prices.

So, the definition of who the working person is has once again been dangerously misunderstood. No wonder that we are already hearing of owners who have decided they can no longer continue. The Labour government claims that this is a budget for growth but already the OBR has downgraded the UK’s forecast for growth. How can there be growth without our small businesses, the backbone of the British economy.

It is not a green light for our economy, the future is not even orange. Like the colour of the party that is responsible for delivering on the budget promises, the future could very easily be red. It is without doubt that we are all going to pay the price for Labour’s extensive spending plans so I hope that they invest our money wisely.

We are experts in small business and have analysed all the budget announcements and how they may affect SME’s. We can assist you with understanding how the increase in both National Insurance contributions and also minimum wage will affect your business and help you develop strategies to minimise the impact of this additional cost burden.

Get in touch with us today to discuss how we can support your business through these changes and ensure you’re well-prepared for the future.

Is it really smooth motoring offering employees electric cars?

Fri, 11 Oct 2024 16:19:10 GMT

With the electric car market opening up significantly in the past few years, offering e-cars to your employees through a salary sacrifice scheme can be a highly attractive proposition. With the tax incentives available and purchasing and leasing options, it is important to fully understand how to navigate these to ensure that the promised benefits are enjoyed by both the employer and employee.

Tax Benefits for Employees and Employers

When an electric car is offered through a salary sacrifice scheme, employees can save on both income tax and National Insurance contributions (NIC) because their monthly taxable salary is reduced by the amount of the car payment. Here are the specific benefits:

Benefit-in-Kind (BiK) Rates: Although the provision of an electric vehicle to an employee still has to be declared as a BiK, currently they have a much lower tax rate compared to traditional petrol or diesel vehicles. For the tax year 2024/2025, the BiK rate for fully electric vehicles is 2%, which means employees pay tax on only 2% of the vehicle's list price. These rates are due to raise going forward but will still remain relatively low.
Income Tax Savings: By reducing the employee's salary in exchange for the use of an electric vehicle, the amount of income tax paid is reduced, leading to significant savings.
National Insurance Savings: Both employees and employers save on National Insurance contributions, as these are calculated based on the employee's reduced gross salary.
Capital Allowances: If the electric car is actually purchased the employer, 100% first year capital allowances can be claimed but only if the car is new or unused. This provides a significant tax relief against trading profits for the employer.
Zero or Reduced Vehicle Excise Duty (VED): Electric vehicles are either exempt or have a reduced rate of VED (road tax), depending on the vehicle, which gives an added incentive to provide an electric car over more conventionally fuelled vehicles.

Purchasing electric vehicles may not be an affordable option for smaller companies but there are still many benefits to be enjoyed by leasing cars instead. Several options are available to employers who wish to provide electric vehicles to their employees through a salary sacrifice scheme:

Contract Hire: This is the most popular option. It involves the employer leasing the car from a leasing company for a fixed period (usually 2 to 4 years) and then offering it to the employee. The leasing company handles all aspects of the car's maintenance and the employer pays a monthly fee.
Finance Lease: With this option, the employer has the flexibility to keep the car at the end of the lease period or sell it. This type of lease will probably include balloon payments (a larger final payment) but can provide more flexibility than contract hire.
Operating Lease: This is similar to contract hire but usually involves a shorter-term arrangement where it is then possible to return the car if the employee no longer needs it or leaves the company. The car is leased with no option to own it at the end of the term, and all maintenance and servicing can be included for an additional fee.

Additional Considerations

Maintenance and Insurance: Some salary sacrifice schemes and leasing options include insurance, maintenance, servicing, and breakdown cover as part of the package, making it easier to manage the costs. It is always important to check exactly what the lease will cover.
Charging Infrastructure: Employers can also consider installing electric vehicle charging points at the workplace. There are additional grants and incentives available for companies that invest in this infrastructure.

Summary of Benefits

Reduced BiK tax rates for electric vehicles
Income tax and National Insurance savings for employees
National Insurance savings for employers
Potential capital allowances and reduced road tax for employers
Variety of flexible leasing options available to companies which are tax deductible

Salary sacrifice schemes are a cost-effective way to offer vehicles, especially e-cars, to employees. The tax benefits make them even more attractive for both employers and employees. However, to make the most of all the benefits available it is best to consult an accounting professional before committing to a purchase or lease as it is not as straightforward as the sales people will claim.

Please contact us if you are considering offering an employee an electric car under a salary sacrifice scheme and we will guide you through all the options available and the tax implications to ensure that you make the best decision for your business.

How will Labour’s budget in October affect me?

Mon, 30 Sep 2024 13:37:14 GMT

On the 30th October 2024 the Government will deliver the first Labour budget for over a decade. More than that, it will be the first budget ever to be delivered by a woman, Chancellor Rachel Reeves.

So, what can we, the tax payer, expect? Especially after she has already told the BBC that it would involve some “difficult decisions” on tax, spending and benefits aimed at addressing the significant public finance shortfall of £22 billion.

No financial crystal balls currently exist but if they did, we can be fairly certain they would foretell the following!

Pension Tax Relief Changes : One of the more contentious proposals is to introduce a flat 30% pension tax relief rate. This change would primarily affect higher earners, increasing their effective tax burden while providing a boost for basic-rate taxpayers. It's estimated that this could raise around £3 billion annually.
Inheritance Tax Reforms : Labour has already indicated its intentions to close loopholes in the inheritance tax system, potentially making reliefs less generous. Ending certain exemptions, like those for offshore trusts and agricultural properties, would also generate significant much needed additional revenue.
Council Tax Revisions : There is a call for council tax reform, addressing its outdated valuation system from 1991. This could lead to more equitable taxation based on current property values but would almost certainly see larger properties attracting higher council tax bills.
Changes to Capital Gains Tax : Although Labour has committed to not increasing income tax or national insurance rates, it has left the door open regarding capital gains tax. There's speculation about raising rates or changing how gains are taxed upon death and this is almost certainly an area of tax that will feature in the budget.
VAT on Private Schools : Labour plans to end the VAT exemption for private schools, which could begin to be implemented in the 2025-26 school year. This policy has already been announced causing much criticism and it is still unclear how much impact this will have on the budget black hole.
Increased Business Taxes : With the recent increase in Corporation Tax to 25% it is unlikely that any major changes will be made this time around. However, there will likely be a roadmap for business taxes, with an emphasis on reducing tax avoidance and increasing compliance efforts.
Windfall Tax on Energy Companies : A long anticipated measure, Labour is expected to extend the current windfall tax on oil and gas profits, increasing the levy by three percentage points.

Conclusions

With the already announced focus on Wealth Taxes the above measures would certainly be in line with this policy. It also falls in line with Keir Starmer’s stance that those with the broadest shoulders should bear the heavier burden.

Labour's approach is framed around repairing what they characterise as financial mismanagement by the previous administration. As they prepare for this budget, both Rachel Reeves and Keir Starmer have indicated that the measures could be “painful” but necessary for long-term fiscal health.

There will be many more developments and updated analysis before the budget day which, at M:Power, we will be keeping a close eye on. We will also publish the major headlines from the budget, with a focus on what it means for small businesses in the UK, so please look out for that.

What does the change in xero subscription charges mean for me?

Fri, 30 Aug 2024 14:58:23 GMT

Xero is rolling out new subscription plans in the UK starting from September 12, 2024.

These changes will simplify the current offerings by replacing the existing Starter, Standard and Premium with three new plans: Ignite , Grow , and Comprehensive . Additionally, the Ultimate plan will remain in place but be enhanced to offer more features.

New Plans Overview

Ignite is aimed at small businesses just starting out and includes essential accounting tools.
Grow is designed for businesses looking to expand, offering more comprehensive tools, including payroll and expense management.
Comprehensive provides full accounting and payroll capabilities, suitable for businesses with employees.

Key points to note

These new plans will bundle features that were previously add-ons, such as Xero Payroll, Xero Expenses, and Analytics Plus, into the base subscription. This change aims to reduce complexity and provide more value for the same or slightly adjusted pricing.
The new plans are available from 12 September 2024 and you can move to a new plan when you like. However, Xero recommend waiting until they email you with your new proposed plan before migrating. This will happen late September 2024.
Existing users will be gradually migrated to these new plans, with those benefiting from more features at the same or lower cost being transitioned first in February 2025.
For users who may face a price increase, the migration will be delayed until September 2025 to allow for a smoother transition.

Current plans price increases

In addition to the new plans and their subscription fees the current plans as they stand are going to subject to a price increase from the 12th September 2024.

Starter will increase to £16 per month, an increase of £1 per month.
Standard will increase to £33 per month, an increase of £3 per month.
Premium will increase to £47 per month, an increase of £5 per month.
Ultimate will increase to £59 per month, an increase of £4 per month.

Conclusion

The change in pricing for existing plans combined with the upgraded new subscription plans has caused some confusion for Xero users. It is important to be aware of what change is going to impact you and when. Regarding the new plans Xero customers also need to know exactly what their new subscription is going to give them and what additional add ons may need to be purchased.

MPower Accounting is a certified Xero advisor and we are on hand to assist you with the successful migration of your subscription to ensure you have the right Xero product at the best price point for your business.

Please get in touch .

Self-Assessment, why do I have to make a return and when do I have to pay?

Thu, 25 Jul 2024 06:46:40 GMT

Self-assessment is the system used by HM Revenue and Customs (HMRC) to collect Income Tax from individuals. Tax is usually deducted automatically from wages, pensions, and savings, but people who run businesses, rent property or have multiple income streams must report it in a self-assessment tax return.

Who Needs to File a Self-Assessment Tax Return?

You must send a tax return if, in the last tax year (6th April to 5th April), you were:

Self-employed as a ‘sole trader’ and earned more than £1,000 (before deducting anything you can claim tax relief on).
A partner in a business partnership.
Receiving income from renting out property.
Earning tips and commission.
Receiving income from savings, investments, and dividends.
Having a total income over £100,000.
Claiming Child Benefit and your income (or your partner’s) was over £50,000.
Make a profit (capital gain) on the sale of any assets, such as a house you don’t live in.

Key Deadlines

Registering for Self-Assessment: by 5th October following the end of the tax year you need to file for.
Paper Tax Returns: by the 31st October.
Online Tax Returns: by 31st January following the end of the tax year.
Paying Tax Owed: by 31st January following the end of the tax year.
Payments on Accounts: by the 31st July the year following the end of the tax year.

If you’ve never filed a tax return before, you will need to register for Self-Assessment online. This involves setting up an account with HMRC. After registering you will receive your 10 digit Unique Taxpayer Reference (UTR).

Completing and submitting the tax return can be a complex task. You will need details of business income and expenses, other income, pensions and dividends and other tax-deductible items such as allowances and donations. Using a professional will ensure that everything is reported correctly and that you declare and pay the correct amount of tax. Accounting professionals will have use of bespoke software through which they can file directly to HMRC saving you valuable time while also giving you peace of mind.

Tax due needs to be paid by the 31st January the following and if a payment on account is due this will need to be paid by the 31st July.

So what are Payments on Account?

Payments on Account are advance payments towards your tax bill. They are made twice a year by taxpayers who file a self-assessment tax return, with the goal of spreading the cost of the tax liability more evenly across the year.

Who Needs to Make Payments on Account?

You must make Payments on Account if your last self-assessment tax bill was more than £1,000. You do not have to make Payments on Account if more than 80% of your tax was collected at source (e.g., through PAYE).

How Payments on Account Are Calculated?

Each payment is half of your previous year's actual tax bill. For example, if your tax bill for the 2022-23 tax year was £4,000, you will make two Payments on Account of £2,000 each for the 2023-24 tax year.

When are Payments Due?

The first payment is due by 31st January during the tax year which it applies to. It is paid at the same time as the tax that is due from the previous year. The second payment is due by 31st July following the end of the tax year on the 5th April.

The Balancing Payment

If your actual tax bill for the current year is higher than the Payments on Account made, you will need to pay the additional amount by 31st January following the end of the tax year. If your actual tax bill is lower, you will receive a refund or you can offset it against future tax bills.

Adjusting Payments on Account

If you expect your income to decrease and believe your tax bill will be lower than the previous year, you can request to reduce your Payments on Account. However, if you do reduce the payment and the amount due is more than you paid you will be liable for interest payments on the unpaid amount. It is always best to complete and file the return before the end of July to be certain of the amount that is due.

Tips for Managing Self-Assessment

Keep Accurate Records: Maintain detailed records of all your income and expenses.
Use Software: Consider using accounting software to help manage your finances and make filing easier.
Plan for Payments: Set aside money throughout the year to cover your tax bill to avoid a financial crunch. And remember that if you need to make payments on account you will need to save more than just the current tax bill.
Seek Professional Help: By engaging the services of an accounting professional you will have the assurance that your tax return has been completed correctly and all relevant information has been used. Even with simple returns it is easy to make errors which could lead to costly penalties and fines… and even worse, paying more tax than you should.

M:Power Accounting are specialists in self-assessment tax and can lift the burden of compliance from you. We will ensure that your tax return is correct and filed on time. The earlier a return is filed the more accurate any reduction of payments on account will be. We don’t want you to pay a penny more to the tax man than you should.

Please contact us to see how much we can help you. Let us deal with your tax return so that you can spend more time enjoying the things you like to do.

Image credit: Photo by Nataliya Vaitkevich

5 Bookkeeping Tips for UK Businesses

Fri, 31 May 2024 12:26:14 GMT

Stay Compliant & Organised

Bookkeeping is the backbone of any successful business, ensuring that financial records are accurate, up-to-date, and compliant with legal requirements.

In the UK, there are different specific regulations and practices depending on whether your business is a Limited Company or files taxes through the self-assessment process. In both cases efficient bookkeeping crucial not only to ensure taxes are reported correctly but also to provide ongoing management information to improve critical business decisions.

Here are the top five tips for effective bookkeeping in the UK:

1. Stay Organised with Digital Tools

In today's digital age, leveraging technology can significantly enhance your bookkeeping processes. Accounting software like QuickBooks, Xero, or FreeAgent, are popular in the UK for their user-friendly interfaces and comprehensive features. These tools help automate many bookkeeping tasks, such as invoicing, tracking expenses, and reconciling bank statements. They also provide real-time financial insights, making it easier to make informed business decisions.

2. Understand and Comply with HMRC Requirements

Her Majesty's Revenue and Customs (HMRC) sets specific requirements for record-keeping and reporting. Ensure you understand these obligations, including what records you need to keep and for how long. Typically, businesses must keep records for at least six years. Familiarise yourself with Making Tax Digital (MTD), a government initiative requiring businesses to keep digital records and submit VAT returns using compatible software. Non-compliance can result in penalties, so staying informed is crucial.

3. Regularly Reconcile Your Accounts

Regular reconciliation of your bank statements with your bookkeeping records helps identify discrepancies early, preventing minor errors from becoming significant issues. Aim to reconcile your accounts at least once a month. This practice ensures that your financial records accurately reflect your business's transactions, aiding in better cash flow management and financial planning. Many of the cloud based apps use bank feeds to further simplify the art of bank reconciliation.

4. Separate Business and Personal Finances

Mixing personal and business finances can complicate your bookkeeping and lead to inaccuracies. Open a separate bank account for your business to ensure that all business transactions are recorded distinctly. This separation simplifies tracking income and expenses, making it easier to manage your books and reducing the risk of errors.

5. Hire an Accounting Professional

While bookkeeping software can handle many tasks, an accounting professional brings expertise that is invaluable in drafting and filing the necessary returns to both HMRC and Companies House. They can help with complex tasks like tax planning, financial forecasting, and ensuring compliance with UK tax laws. An accountant can also provide strategic advice to help your business grow. Even if you manage day-to-day bookkeeping yourself, consulting with an accountant periodically can help you stay on track and avoid costly mistakes.

Conclusion

Efficient bookkeeping is essential for the smooth operation and success of any business. Modern accounting packages offer the business owner the ability to manage their own bookkeeping but hiring a bookkeeper is essential for business success. Professional bookkeepers ensure compliance, saves time and provides valuable insights, enabling the business owner to focus on what they do best – running and growing their business. Investing in a skilled bookkeeper ultimately leads to better financial health, reduced risk and increased peace of mind.

MPower Accounting provide a comprehensive bookkeeping service so please do contact us to learn more about how our support can enable your business to grow.

Can I make a loan to an employee?

Tue, 19 Apr 2022 15:50:49 GMT

As an employer, you may be approached by an employee needing a loan for personal reasons, financial hardship, cost of a travel pass, child care fees . . . the list could go on. What do you do? And more importantly what are the tax implications of helping a loyal employee out?

Firstly, any loans below £10, 000 will not attract any further tax or NI treatment. In this case you will still have to arrange a loan agreement and repayment terms set between you and the employee; a simple document will do. The loan should be set up as a liability on the balance sheet of the company and repayments can easily be put through payroll after tax and NI payments have been taken.

But what is the loan is more than £10,000? The tax position on these loans, if the interest rate used is either below the official rate used by the HMRC, or no interest is applied, there is a Benefit in Kind (BiK) that has to be declared. This would mean the loan would have to be stated on a P11D form and would result in extra tax being paid by the employee and Class 1A National Insurance being payable by the Company

As always, there are complexities in making a loan to an employee so if you are in the situation where an employee is requesting a loan please do contact us for further advice.

We all want to help our employees, especially at the moment, but ensuring you understand the implications and have applied the correct tax treatment is vital.

The increase in the National Insurance contributions and what does this mean for me!

Tue, 15 Mar 2022 08:57:00 GMT

Last autumn the government passed a law to increase National Insurance Contributions (NICs) from April 2022. That date is now upon us, so what will it mean to the everyday tax payer?

NICs are a levy paid by employees and the self-employed on their earnings, and by employers on the earnings of those their employees. NICs are not charged on those with low earnings, or on pension income or investment incomes (such as dividends or capital gains). Also, employee and self-employed NICs are not levied on the earnings of those over the state pension age (currently 66 years of age). The main rates of employee and self-employed NICs currently start to be paid on earnings (or profits) above £9,568. From April, this threshold will increase to £9,880. The higher-rate threshold is £50,270 (and will stay at that level from April).

So although the good news is that the threshold is to increase to £9,880 the bad news is that the rate due to be paid is going to be increased by 1.25% from April 2022. To put it simply the main rate for an employee was 12% – it will now be 13.25%.

And there is a further sting in the tail! The rate of dividend tax is also to be increased by this 1.25% therefore increasing what basic tax payers will pay on dividends from 7.5% to 8.75%. For higher tax payers the increase will mean a rise to 33.75%.

I won’t go into specific breakdowns but please do contact us if you would like further advice, especially if you are self-employed or running a Limited Company as the rules will be slightly different.

Our Company

Fri, 25 Jun 2021 12:54:00 GMT

Welcome to the start of a new series of videos and vlogs from M:Power accounting

Self-Assessment Tax Returns; the Early Bird catches the Cash!

Mon, 19 Apr 2021 16:28:59 GMT

How filing your Self-assessment return early could save you money.

So why could filing your self-assessment return early save you money? So many people who need to file returns wait until the last minute but this could cost unnecessary expense in payments on account to the Revenue.

Payments on Account; what exactly are these?

If your tax bill is over £1000 (with some exceptions) you will not only have to pay the tax due on the 31 ^st January but also half again towards the next year. There is then another payment on account due at the end of July. This is why filing your tax return early can save you unnecessary payments to the HMRC. And let’s face it – do you want your money in your bank account or in the Revenue’s?!

If your income is less than the previous year you may find that the payment on account due in July doesn’t need to be made or can be reduced! That’s good news in itself but it gets better. It can be possible that a refund is due. What better news is there for any small business especially after the lean times of lockdown! Any funds paid into your bank account are welcome and can be used to invest in your business . . . . . or go on holiday though probably in the UK!

Please contact M:Power Accounting if you feel that you could benefit from an early self-assessment review to avoid paying unnecessary amounts to HMRC in July. As we come out of lockdown every penny makes a difference; invest in your business rather than the HMRC!

Bounce Back Loan Scheme (BBLS)

Thu, 26 Nov 2020 10:17:42 GMT

Updates on funding and assistance Bounce Back Loan Scheme (BBLS)

So, the Bounce Back Loan Scheme (BBLS) seems to have bounced back! For months it was impossible to apply for one, I know, as we were trying to get one for my husband’s business. Well now, we have applied for one! Hoorah! So, how good are they and why should you take one?

The scheme helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available is £50,000. The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year. The length of the loan is 6 years, but you can repay early without paying a fee. No repayments will be due during the first 12 months.

The terms of this loan are incredibly favourable for any small business needing to raise finance during these uncertain times. Understandably some small businesses are facing cash flow problems so this loan would certainly help to bridge the gap until the economy starts to pick up. It is also a wonderful opportunity to make an investment in your business so that you are positioned properly for recovery. One word of warning though, this loan should only be applied for with a plan in mind and even with it some businesses are going to struggle to survive in this current climate. And remember, the loan should also only be applied for if your business has been adversely affected by the Coronavirus which many have!

The scheme is open to applications until 31 January 2021. If you already have a Bounce Back Loan but borrowed less than you were entitled to, you can top up your existing loan to your maximum amount. You must request the top-up by 31 January 2021.

If you’d like any further help with BBLS and how to apply please do get in touch with me.

COVID-19 Updates

Mon, 06 Jul 2020 12:26:00 GMT

With the easing of lockdown comes a number of changes to the Governments economic initiatives to help businesses whose trading has been disrupted by Covid-19.

Please find below updates to the funding and assistance that has been available:

From 1st August the Job Retention Scheme will change as outlined in the table below and the scheme will be closed on the 31st October 2020. The last day claims for June need to be made by the 31st July 2020.

The VAT payments deferral scheme ended on 30th June 2020 and there has been no extension to this. As payments for returns to the 31st May 2020 are due on the 7th July 2020 these will need to be paid! However, any businesses that will struggle to make this payment can still apply to HMRC under the existing Time To Pay scheme where repayments can be arranged over a specific time period.

Currently, the Bounce Back Loan scheme is open until the 4th November 2020. Loans are reasonably easy to apply for and there has been a high award success. The repayment terms are favourable as the Government will cover the interest payable for the first 12 months but then the borrower will have to make full repayment of both loan and interest up to the end of a possible 6 year term. The Government has set the interest rate t 2.5% and no lender fees can be charged. An injection of capital now would help any business coming out of lock down and investment at this time could reap rewards going forward.

From 27th June 2020 further companies will be get an extension to their accounts filing deadline at Companies House. Also, the usual 14 day deadline for filing the Confirmation Statement has been extended to 42 days.

The Chancellor has announced a second and final grant to the self-employed who were eligible under Self-employment Income Support Scheme (SEISS) the first time around; unfortunately the scheme has not been expanded to include those who did not qualify. The grant will be 70% rather than 80% of the average earnings. Applications will open in August and you will have to confirm that your income has been adversely affected by Covid-19.

And while on self-employment, please remember that payments on account due on 31st July 2020 can be deferred but will be due by the 31st January 2021. They can be paid at any time so you don’t have to wait until next January to make the payment.

All the above are from taken from the current guidance issued and could be subject to change. We will of course be monitoring the guidance so do look out for further updates on our website.

If you would like to discuss, or need help, with any of the above please do contact us .

The Holiday Blues…

Wed, 25 Sep 2019 13:28:00 GMT

The collapse of Thomas Cook will leave many with the holiday blues.

Founded in 1841 by businessman Thomas Cook, the company organised railway outings for members of the local temperance movement. Some 178 years later, it had grown to a global travel group, with annual sales of £9bn, 19 million customers a year and 22,000 staff operating in 16 countries. On Monday 23 ^rd September 2019 that all came to an end. So what caused the downfall of this worldwide corporation and what can small business learn?

This firm’s fate was sealed by a number of factors; financial, social and even meteorological! Yes, the weather played its part, as it always does! With better summers in the UK many holidaymakers chose to stay put and enjoy the beauty of our own rich heritage and glorious countryside. Other factors outside Thomas Cook’s control such political unrest abroad and terrorist events in popular destinations also contributed to a downturn in their business. Small businesses also have to change due to forces that they have no control over. One could mention the ‘B’ word here as none of us really know how Brexit is going to change our economy, but let’s leave that there!

Thomas Cook also faced stiff competition in a changing market. With so many stores closing on the declining high street and internet holiday purchases rising, their positioning was wrong. No longer did potential holiday makers use the traditional Travel Agent in town, they turned instead to the internet not only to buy package holidays but also to create their own trips by buying flights and accommodation separately. One former Director said that Thomas Cook, “had an analogue business model in a digital world”. Competition is what keeps a business vibrant; small business needs to understand what competition it faces and be responsive to stay that one step ahead. It needs to respond to customers’ needs rather than just continuing to provide the existing service or product.

Finally, there has been much in the news about the actions of the Executives who were charged with running the company. Some reports said that they were completely ‘under-whelming’ while others have gone further claiming massive salaries and bonuses contributed to the company’s downfall. Directors and Owners are responsible for the success of the business, whatever the size of the company. Knowing the market, keeping in touch customer needs and having a sound understanding of the finances are all key to ensuring continued success.

Thomas Cook could have survived, in fact its troubles weren’t new as in 2011 it was close to insolvency; there was time for change but the warning signals went unheeded so the inevitable happened. Small business has the ability to adapt quickly and change course, just like a speed boat as opposed to an oil tanker. Learning the lessons from Thomas Cook can ensure that it’s wall to wall sunshine rather than a case of the holiday blues.

2019 24th-26th September: ICB Tour de North

Tue, 24 Sep 2019 09:00:00 GMT

Paula tours The North

By popular demand Paula is speaking at ICB events in York and Newcastle. With her own personal insights and years of experience she will be giving valuable advice in how to ensure that your practice thrives while adhering to AML and GDPR regulations.

24th-26th September 2019

ICB Tour de North

2019 18th September: ICB Oxfordshire half day workshop

Wed, 18 Sep 2019 09:00:00 GMT

ICB Oxfordshire half day workshop

Paula is one of the guest speakers of the inaugural Oxfordshire ICB workshop.

Starting at 11am and going through the afternoon this event will equip local bookkeepers to add value to the service that they give their clients.

2019 18th September

2019 5th September: ICB Lincoln Branch

Thu, 05 Sep 2019 09:00:00 GMT

Take Care Out There

In this new presentation Paula will be giving bookkeepers in Lincolnshire sound advice and practical pointers on how to run their practices safely and securely to ensure continued success.

Branch meetings are open to all ICB members, please go to www.bookkeepers.org.uk for further details.

Summer time fun in the sun – but will the taxman cause the clouds to come!

Sun, 04 Aug 2019 11:53:00 GMT

I’m sure that all of us look forward to the summer weeks, evenings on the patio, pimms or gins and BBQ’s, well that’s if the British weather plays ball!!

So far this year it’s been heat wave one day and record rainfalls the next, no wonder so many of us decide to go abroad for a well earnt holiday.

On that point, if there is a temptation to mix business with pleasure on a trip abroad during the summer be careful. HMRC’s house rule of “wholly and exclusively” for business purposes applies wherever you go in the world and in the case of foreign travel the Revenue Inspectors will be more diligent than Border Control! With HMRC’s concept of “duality” any suspicion of a personal benefit could render the whole of the foreign travel inadmissible! Any travel that is of a personal nature, whether that’s a partner joining the trip or taking in an after conference break, has to be booked totally separately so that the business cost comes from the business and the rest from a personal bank account. That would also include home bound flights!

But staying closer to home, the works summer do is now becoming almost as much of an event as the Christmas party but what can be claimed for and what not? Well, the good news is that any staff party or function qualifies as a tax free benefit for the employees providing you meet the following conditions:

The total cost of such functions must not exceed £150 per head per year. This includes the VAT and any extra costs such as travel and accommodation.

This is a limit and not an allowance so if the amount is exceeded even by £1 the whole benefit becomes taxable.

The event must be primarily used for entertaining staff and not just directors and it must be open to all staff (in that location if you have several branches or offices).

Input VAT can be reclaimed but this may be restricted if customers are also entertained at the same time.

So, it is a bit sunshine and showers but done correctly there’s no reason why a summer party can’t be enjoyed or a trip abroad for work give opportunity for some personal time away. However, to ensure umbrellas are not needed, make sure the rules are kept to otherwise it will be torrential HMRC rain showers!

2019 2nd August: ICB Warwickshire

Thu, 01 Aug 2019 09:46:00 GMT

Speaking at the Warwickshire Branch, Kenilworth

Paula will once again present her most popular talk, VAT Chat, at this ICB event in Warwickshire. Branch meetings are open to all ICB members so do contact the ICB directly for further details.

www.bookkeepers.org.uk

VAT – Going, Going… Gove?

Mon, 17 Jun 2019 11:05:00 GMT

As the Conservative leadership contest heats up the major contenders have already made pledges on tax reforms; Boris raising the higher tax threshold to £80,000, Raab cutting basic rate of income tax from 20% to 15%, but perhaps the most interesting announcement came from Gove pledging to scrap VAT and replace it with a Sales Tax; now there’s some food for thought.

Value Added Tax (VAT) as we know it came into being in 1973 as a prerequisite of Britain joining the European Union and was a standard 10% rate on most goods and services. One cannot help but see the irony here as we are now leaving Union – perhaps that is the opportunity Gove is seeking to explore with his policy.

Before VAT we had The Purchase Tax which was actually implemented to reduce the wastage of raw materials in World War II. Both tax methods serve as a consumption tax whereby the tax is levied when the item or service is actually consumed. As opposed to Income and Corporation Tax which are directly applied to income or profit, it is an indirect tax and is payable by consumers no matter what their income is. The currently VAT rate is 20%. Once registered for VAT, businesses must apply VAT to sales invoices but can offset the VAT they have paid to suppliers. A quarterly report is then made to HMRC and the difference between the two is either paid or refunded. However, once a consumer buys any VATable item they will have to pay the VAT as, by definition, it is a consumption tax. Over the years VAT has become incredibly complicated with literally thousands of anomalies and this has also led to more complex reporting mechanisms which is an expensive burden on all businesses.

Gove claims that his Sales Tax will be lower and simpler. Rather than the business having to calculate the difference between the tax paid and suffered the 20% would only be applied when an item is finally sold to a consumer. That would certainly relieve the administrative burden on businesses however until more details are published we can only speculate how this would work in practice.

One further comment is that much of the complexity of VAT has come about with the notion of borderless trading in the EU. Each country has its own version of VAT, and at different rates, so to create a level playing field a way to standardise VAT was necessary. Understanding how to apply and report VAT for a business trading into Europe is a hard task as for every rule there is usually a number of exceptions. However, when we are no longer part of the European Union we will not be obliged to follow these rules so could have freedom to change to Gove’s proposed Sales Tax. However, other countries in Europe are not going to take to this favourably if it means the UK’s goods and services have an unfair trading advantage and it is likely that tariffs would be raised to once again level that playing field.

To summarise, UK VAT raises £140bn a year so any reform to such a big income raiser would be very risky if it wasn’t managed smoothly. There are also some serious implications regarding our exports to Europe. On the one hand a simplified system would be welcomed but would it work in practice? At this moment in time it is just a headline and there’s also another small issue . . . . . Gove would need to win the contest.

Will Gove get in or will it be “Gove-is-gone”, which would at least settle our stomachs after much food for thought!

Paula

2019 26th June: ICB London

Wed, 22 May 2019 16:52:00 GMT

Speaking at ICB’s flagship networking group

Paula will be speaking on Wednesday 26 ^th June at ICB’s flagship networking group in London addressing many issues that affect the modern bookkeeper and accountant.

2019 12th June: ICB Branch Northampton

Tue, 21 May 2019 16:55:00 GMT

Speaking at ICB Northampton

On Wednesday 12 ^th June Paula will be speaking at the ICB Branch in Northampton on all things VAT.

2019 9th May: ICB Inspire Tour at Gatwick Airport

Thu, 02 May 2019 15:33:00 GMT

ICB Inspire Tour

I will be at the ICB Inspire Tour at Gatwick Airport on Thursday 9th May.

2019 20th May: ICB Branch Bishops Stortford

Thu, 02 May 2019 15:21:00 GMT

How to finalise company accounts.

I will be speaking at the ICB Branch in Hertfordshire, Bishops Stortford Monday 20th May. I’ll be talking on how to finalise company accounts.

Brexit – the Final Frontier

Mon, 01 Apr 2019 12:19:00 GMT

Brexit and Star Trek – both the final frontier! How many versions of these have we had? Just like the Star Trek time line, as soon as I write this, it will be out of date! And just like Brexit, we are now going boldly where no “politician” has gone before. By the time you read this, the political universe will have probably shifted again as today we face more votes on alternative Brexit proposals, known as the indicative votes!

I’m not going to give a political commentary on Brexit. This is being very well done by the News Channels. BBC is my preferred option: Laura Kuenssberg and Kayta Alder make a great Kirk and Picard!

My star log is what this means to small business – we are like the little shuttles that move between the starships but without us nothing would happen. Small business is the backbone of the UK economy. And it is suffering! Although many see these political wranglings as remote, like a far off galaxy, they affect every business in the UK. Uncertainty is the worst environment that any business can face. Order books are on hold and customers are cautious. What do we do in this universe?

One : There are always winners in uncertainty, be bold! If you believe in your product or service then open the communicator and broadcast.

Two : Businesses built on sound structures will succeed. Get your processes and procedures in place so that you provide a solid service from first contact to final landing.

Three : Keep going and don’t believe the spoilers! The Brexit landscape is changing so quickly, both here and in Europe; pundits give their views on what is going to happen but often get it wrong. There are many plot twists ahead, just like a good Star Trek film.

So in the words of Spock – live long, prosper and engage with Brexit!

Paula

Fruit flies like a banana!!!

Mon, 11 Mar 2019 15:10:00 GMT

Time flies like an arrow and fruit flies like a banana (work it out!); here we are again, the 5 ^th April approaching fast . . . . whether you’re an arrow or a fruit fly, it’s time to get ready for the tax year end!

With that in mind here are a few pointers to consider:

The tax benefit on dividends has certainly been carved away; long gone are the days of the 10% dividend tax credit! For this tax year there is a £2, 000 dividend allowance at zero rate, yes that’s all! Any money taken by dividends will be considered in an individual’s tax return. This means that up to the higher bracket the tax on dividends is 7.5% and thereafter you will be suffering 32.5%. However, if you cross into additional rate, you will be looking at 38.1%! However, dividends are still the most efficient way for a director to take funds from their company.
The personal tax allowance is £11, 850 this year with a promise in the last budget to increase this to £12, 500 to April 2020. The higher rate is due to increase to £50, 000. Watch this space!
The threshold at which you pay a higher rate of tax has increased to £46, 351 but the additional rate has stayed the same at £150, 000. The rates of tax paid have also stayed the same at 20%, 40% and 45%. Please remember that you only pay the higher rates of tax on the income over the thresholds, not the total income. Also, if you are an additional tax payer your personal tax allowance will decrease by £1 for every £2 that you earn above £100, 000.
The auto-enrolment pension rates are 2% employer minimum contribution and 3% staff contribution to 5 ^th April 2019. From 2019 onwards these will be 3% employer and 4% staff. It is important that companies realise how the rates raise will not only impact their own contributions but also those employees who have opted to buy into such pensions.
The main rate of corporation tax has reduced from 20% to 19% in 2018. This rate is due to remain for the 2019 year. Currently it is due to reduce to 18% starting the 1 ^st April 2020.

These are just a few headlines for the new tax year. If you have any specific questions please do get in touch as I know there are other areas of tax that many are affected by. We can start working with you straight away – there’s no need to wait for the deadline of the 31 ^st January 2020!!!

Paula

Interesting VAT facts!

Mon, 25 Feb 2019 10:17:00 GMT

Yes, I know that is a strange title, but I’m going to give you five interesting facts about VAT, really! “And why?” I hear you cry! Well, one, because I do need to get out more and two, it is actually good to know more about VAT rather than seeing it as just another tax we have to bear! I’m also going to pose a prize winning question somewhere in this blog so don’t forget to read through all of it; got you all interested now? So here we go:

What is VAT? It is actually a consumption tax! There are three main taxes in the UK, personal tax, corporation tax and VAT. VAT is the only indirect tax which means that it isn’t levied at point of income but it is applicable at point of consumption. However, it is an essential tax in the UK and is here to stay, whatever Brexit brings us!
When was it introduced to the UK? VAT as we know it was introduced to the UK in 1973 as a pre-requisite of joining the European Economic Community (EEC) – how far we have come since then! We already had purchase tax but to join the union we had to adopt VAT as we know it now. And the starting rate was . . . . (drum role) 10%! So, what will happen post 31st March? The end of VAT? Back to 10%? Both would be great outcomes for the British public but are about as likely as an agreement on the backstop!
What is the current income level for VAT registration? To keep this answer simple, if your income is above £85, 000 then you need to register for VAT. This is on a rolling period so if you’re building your empire make sure that you check your income over the last twelve months and don’t get caught out. As ever with VAT, there are other considerations so if you’re not sure whether you should register or not please do contact us.
The complexities of VAT! I see VAT like playing chess; it’s easy to learn the basics but to become a master takes years of experience! On the supplies bought in VAT can be claimed where charged (input VAT); VAT will need to be added to any sales to customers or clients (output VAT). The difference between the two is what you pay over to the HMRC. Simples!? If only it was really that simple. VAT law in the UK is one of the most complex in the world so having the advice of a professional is essential. At M:Power accounting we can help you to understand your VAT position and make sure you report it correctly.
And finally the question? Who likes a jaffa cake? Let me know the VAT history on this, whether it is VATable, or not, and why. The first correct answer will win an appropriate prize (only available to clients, not team or ICB members or husband!)

If any of the above raises a question about your own VAT situation please do get in touch.

Paula

Making Tax Digital (MTD) Update

Wed, 13 Feb 2019 11:14:00 GMT

Once upon a time, using rather cinematic language, I introduced, explained about and discussed the implications of this new initiative.

That was well before Christmas when the release date of April 2019 for MTD on our local screens still seemed similar to the Star Wars galaxy – a long time ‘to go’ and far far away! Well, as Yoda would say, “time to get ready it is”, as the force of HMRC’s long awaited MTD tax empire is about to strike back.

Like any good film review, let’s give you the basic story line:

Starting from April 2019 VAT registered businesses with a turnover of over £85, 000 will have to register, with some exceptions.
Accounting records will need to be digitally kept in a software product or a spreadsheet.
VAT returns will need to be submitted to HMRC using functional compatible software that can access HMRC’s own platform in a seamless manner. This means that the software must be able to directly send the VAT information digitally and not be retyped into the HMRC system.
The current reporting schedule for VAT won’t be changed and businesses will still make filings on the same quarter end that they currently have.
Those businesses in the MTD net will not be able to access or use the HMRC’s online portal.

A bit like the Dark Lord himself, it all sounds a little scary. What exactly will it mean to those businesses that need to be MTD compliant? Is it time to put your hoodie on and grab your light sabre?

As long as you’re using compatible software such as Quickbooks, Sage and Xero, the transition should be pretty seamless. There are some behind the scene changes that will need to take place but once you are on the MTD platform making the quarterly returns will be the same as it is now for VAT returns. However, for those businesses who don’t use such software or even still keep records manually there is now little time to make the necessary migration to MTD compliant software; the storm troopers are coming.

At M:Power Accounting we are now MTD ready and authorised as an Agent Service provider. We will begin to move our clients to the new MTD platform and can assist with any changes needed to be fully MTD compliant. We also welcome new businesses that may need further help in meeting the obligations of MTD and we will ensure that all software and systems are in place before the April deadline.

So, sit back, relax and enjoy the film, which will certainly have plot twists before the happy ending that working with M:Power Accounting on MTD compliance will bring.

May the force be with us all…

Paula

It’s that time of year again!

Sat, 05 Jan 2019 18:13:00 GMT

Yes, it’s that time of year again! The decorations are down, left overs gone and kids about to go back to school. We all knuckle down and get back to work with new resolve and resolution; for us in the accounting world that couldn’t be more true as . . . . . . . . the 31st January looms!! If December is about goodwill to all men (and women) then January is about good income to the tax man (and woman)!

Tax returns, and payments, are due in by the 31st January – and as I have said before, this is not a target but a deadline! Please don’t wait till 11:59pm on Thursday 31st January 2019 because it is likely that the HMRC systems will already be down. I am pleased to say that the clients I look after are well trained, most returns filed and those not will be very shortly. This is one of the joys of employing the services of a professional; we know what we are doing and when we need to get it done by!

So, I thought I’d answer three questions I’m often asked about personal tax:

1. Why does the tax year end on the 5th April?

Good question. This actually dates back to 1582 when Pope Gregory XIII ordered a change in the calendar from the Julian which had been used since 42BC. To cut a long story short, it wasn’t until 1752 that the British caught up with all the changes and until this year our tax year started on the 25th March which was the old New Year’s Day. In order to ensure no loss of income the Treasury decided to still run a 365 day year, and adjusting for a leap year brought the new tax year end to the 5th April . . . and this date has remained unchanged ever since!

2. What are payments on account?

This is the most asked question! Basically, when your tax bill is over £1, 000 (with some exceptions) you will have to make a payment on account towards your next years tax. This is usually half of the amount of tax that you are due to pay. The other half is due on the 31st July. What this means is that when you make you next return the following January you should have paid most if not all of you tax for the year if your income has stayed relatively stable. You will have to pay any balance of tax you owe and of course the first payment of account for the following year. You are able to apply to reduce payments on account if your income has reduced but be careful – if your tax bill hasn’t gone down and you haven’t paid the correct payments on account you could be charged interest by The Revenue.

3. Do I still need to complete a self assessment tax return?

This is always a good question to ask. There are very good reasons why you may need to complete a return as a one off, for example, capital gains tax. It is relatively simple to both apply to make a return and also inform HMRC when it is no longer relevant. Another example would be if you were self employed but then went back into employment. The self assessment tax return is basically a year end summary of your earnings and the tax you have paid; if you receive income from difference sources then you will need to complete a return. So if you are employed but rent property you will need to complete a return, and that is also the same for a company director as you may receive income from dividends. However, it is always good to check whether you still need to complete a return and if not make HMRC aware. I would say that if you’re earnings are only through PAYE employment you should not also be completing a return but if you are not sure please seek assistance of a professional.

Self assessment tax is complex and with the help of a professional you will be able to not only to complete your return on time but also maximize all the tax reliefs available. Please do contact us if you are still struggling with your return; we will be able to complete this for you and you may be pleasantly surprised with some of the tax reliefs you didn’t know you were able to claim.

Paula

Christmas Entertainment – will BBC give you more for your money than the tax man?

Sat, 08 Dec 2018 10:21:00 GMT

The answer to this question is probably yes, even though there’s no Dr Who special this year!

Rules on entertainment haven’t really changed that much. Any entertainment that does not involve staff is not deductible for tax purposes; you can still put it through your books but at the end of your company year we become the Christmas Grinch and remove it from the tax return. However, if you do treat your favourite client to a Christmas meal at least you can have a nice evening out without having to pay for it personally which will save on your personal tax.

However, staff entertaining IS allowable as a business expense but there are some rules to follow. You can claim food, drink, entertainment and other incidental costs such as travel and overnight accommodation. However, before you get carried away booking that James Bond theme night in central London that you’ve always wanted to do remember you only have an allowance of £150 per head inclusive of VAT per year. Provided that limit is not exceeded you can do any number of parties during the year. A reasonable Christmas do and a summer BBQ will about use that up.

What if you want to give gifts? Well, any gifts to clients are only allowable as a tax deduction if the total cost to one individual is less than £50, the gift has some relevance to your business and isn’t food, drink or tobacco; lucky clients though if that is the industry you work in! So my lucky clients will be receiving an M:Power Calculator this year.

Finally, what about staff? As long as what you give them is deemed a trivial benefit, which means it must cost £50 or less and not be part of their contract or a reward scheme. So some good news to end with, a bottle of wine, some chocolates or even a small turkey are likely to be exempt.

So, for £150.50 you can buy your TV license and enjoy hours of entertainment over Christmas. I guess after the James Bond theme night recovering in front of the TV may be just what you need!

Child Rescue Nepal – our new charitable partner

Thu, 29 Nov 2018 17:08:00 GMT

At M:Power we are committed to helping charities during the course of the year and we are pleased to announce that our first charity partner is Child Rescue Nepal.

Please read a message from their Chief Executive, Jo Bega:

Child Rescue Nepal are one of the only in charities in Nepal who actively rescue children from slavery. We also prevent trafficking through raising awareness and prosecuting the perpetrators. We have rescued over 750 children, reuniting the majority with their families. We have also pursued the prosecution of 24 traffickers, helping jail 14 in Nepal and India.

Whilst rescuing children from slavery is an important part of our work, preventing children from being trafficked in the first place is far better for children, and more cost effective. Tragically, 80% of trafficking victims in Nepal have never enrolled in school. We work in the trafficking-prone district of Makwanpur, supporting over 40 community schools. We train teachers in child-centred methods, set up libraries, fund midday meals and provide educational bursaries for children whose families can’t afford the basics – such as uniforms, shoes and stationery. We also fund classrooms, taps and toilets.

We are delighted that M Power Accounting Services have selected Child Rescue Nepal as their charity partner, matching every donation to helping us to strengthen and support remote schools in Nepal. With your support, we can keep children safe in schools and out of the hands of traffickers.

As we come near to Christmas many of us will look to donate some money to charity; so in that spirit of goodwill I am please to confirm that M:Power Accounting will match any donations up to a value of £50 given by our clients as well as making a donation ourselves.

Please follow the link below to make a donation and then email us so that we can do our bit to support this worthwhile cause.

www.childrescuenepal.org

Paula

2019 16th January: Surrey ICB Branch in Guildford

Thu, 29 Nov 2018 13:57:00 GMT

Don’t be limited on company accounts

Surrey ICB Branch in Guildford on Wednesday 16th January.

Paula Veysey-Smith, CFICB, Chair of the Advisory Council and your co-Branch Chair for West Kent will give a talk on compiling a set of company accounts for filing to Companies House and calculating the corporation tax liability.

This is a very popular presentation across the nationwide Branch network as it gives valuable tips to both bookkeepers who either are already doing company accounts or aspire to do so. It is also an accepted learning practice that if you understand what happens to your work after you pass it on you will do it to a better standard. So all bookkeepers will benefit from this talk as it will enable you to do more on the preparation of the trial balance before the accounts are passed to an accountant.

The venue will be the Holiday Inn, Guildford, Surrey.

2018 26th-27th November: Institute of Certified Bookkeepers Annual Summit

Mon, 26 Nov 2018 09:31:00 GMT

Speaking engagement

Institute of Certified Bookkeepers Annual Summit

26 ^th – 27 ^th November 2018

Radisson Blu Edwardian Hotel
London Heathrow
www.radissonblu-edwardian.com

Speaking on how to start your business.

Budget 2018

Sun, 04 Nov 2018 15:16:00 GMT

A few announcements worth noting

The budget took place on Monday and was full of optimism. Hammond was accused of taking a gamble with public finances as he went for a spend budget betting on the OBR’s (Office of Budget Responsibility) better predictions for UK growth. But with Brexit around the corner all their positive predictions could soon be down turned and where does that leave our economy? And more importantly where does that leave the small business.

Here were a few announcements worth noting.

And to Brexit: well there is news that May has made a secret deal with the EU to keep the whole of the UK in the customs union to avoid any hard borders in Ireland. But what does this mean? The economy is stagnant; it’s a period of uncertainty and we are all waiting to see what happens next.

I believe that the next few weeks will be telling. Deal or not deal? There was really little in the budget to encourage small business; nothing about dividends or national insurance contributions. No real stimulus for the small business that is the backbone of the economy.

But, as the Chancellor did, I will save the best to last: Personal tax allowance was increased to £12,500 from April 2019 and higher payer tax to £50,000. That is what many will remember from the speech.

Watch this space – the budget may have been made but Brexit is not over!

Making Tax Digital (MTD) – the sequel

Mon, 08 Oct 2018 13:43:00 GMT

2020 – MTD remade

However, there are other components to MTD such as income and corporation tax that have been placed on hold until April 2020 at the earliest. So just like every sequel, what can we expect and will it carry on in the genre as the original release? The issue with MTD is that it has already made been delayed and has changed its Director a number of times.

Under the reformed timetable those businesses with a turnover above the VAT threshold (£85, 000) will have to keep digital records, but only for VAT purposes, staring from 2019. Businesses will not be asked to switch to MTD and update HMRC quarterly for other taxes till at least 2020. We await further details to be announced for this but what can we glean from the current spoilers?

Firstly, MTD for income tax will apply to the self-employed, partnerships and those who receive income from property. However, most of this legislation is still only in draft form; in film terms, it’s still with the writers! If MTD for income tax does become mandatory, businesses in scope will be required to maintain accounting records digitally and submit quarterly information to HMRC and finalise their tax position at the end of the year.

So this will mean that businesses, or individuals, in scope, will have to either acquire suitable commercial software or appoint an agent to submit information to HMRC on their behalf. HMRC’s paper or online self-assessment portal will only be available to those outside the scope of MTD for income tax. There will be an exemption for those with a turnover below a threshold although this is yet to be decided. (£10, 000) was the suggested level from the consultation process.

Whether this film is a horror story is still to be seen; for some it may be but for others who are prepared it may be an enjoyable drama with a few twists and turns. With the budget soon upon us and Brexit still the ongoing serial drama I’m sure that there will several plot twists ahead of us! Watch this space!!

Making Tax Digital

Tue, 11 Sep 2018 06:33:00 GMT

Making the UK tax system effective, efficient and easier

MTD – Making Tax Difficult, sorry, I mean Digital, is the HMRC initiative designed to make sure that the UK tax system is effective, efficient and easier for tax payers – or perhaps the Revenue! This initiative set out the vision to end the tax return and transform the tax system by 2020.

The original concept was that tax payers would send HMRC summaries of their income and expenditure at least four times a year enabling a more ongoing and accurate projection of tax due rather the existing system of one return a year. This would have necessitated tax payers to integrate their accounts with software to enable these returns to be made. Along with a number of other clauses MTD was actually removed from the finance bill before the 2017 election which led to speculation that is was going to be dropped all together. However, this is not the case and “son” of MTD known as MTDfb (Making Tax Digital for business) is going to affect some of us from April next year.

MTDfb begins on 1st April 2019 with MTD for VAT. All VAT registered businesses with a turnover above the VAT threshold, whether they are limited companies, sole traders or partnerships, will need to adhere to the following requirements:

Firstly, it doesn’t change the current reporting schedule as VAT is already reported quarterly. However, it does dictate how records need to be held and how the VAT return can be submitted. The current guidelines state that from April next year all VAT returns will need to be filed using third party software and the current portal via the HMRC log in screen will be decommissioned. This means that it WILL NOT be possible to file your return by logging into your HMRC portal and entering the figures there.

For businesses already using software such as Xero, Sage & Quickbooks there should be a seamless transition. However, for those businesses not using MTD compliant software and still relying on paper records there is now just six months to become compliant with these new requirements.

If you are still reliant on the HMRC portal for filing your VAT return you need to act now. Moving your bookkeeping records to MTD compliant software needs planning but is easily achievable by the deadline of 1st April 2019. Please do contact us if you are concerned that you are not compliant or would like further details about Making Tax Difficult, sorry, Digital!

More on MTD next week as we look at what to expect going forward after the changes in April 2019…

“But why?”

Mon, 23 Jul 2018 10:19:00 GMT

It’s that time of year again – 31st July, where some of us need to make a further payment to the Inland Revenue for our self-assessment tax return. “But why”, I hear you say, “don’t we pay enough already?!”. I get so many enquiries about payments on account at this time of year I have decided to repeat a blog of a few months ago which will explain why we need to pay both at the end of January and July.

Payment on Account is a tax payment made twice a year by self-employed people, and also Director Owners taking dividends, in order to spread the cost of the year’s tax. It is calculated by looking at your previous year’s tax bill, and is due in two instalments.

The Payment on Account can be thought of as a way of paying off some of your tax bill in advance. The first instalment is due on 31st January (the same day as your ‘balancing payment’, which clears your tax bill for the previous tax year), and the second is due on 31st July. For those of you entering the payment on account regime you will have to pay the tax due and then 50% again for the payment on account; the second 50% being due on the 31st July. It is intended to help you spread your payments out during the year – and, of course, to help provide the Exchequer with a financial boost in the middle of the year. In reality, it does facilitate the bringing forward of paying taxes as the tax due in any given year is paid in that year.

So, each of the two instalments of the Payment on Account will normally be 50% of your previous tax bill. So, if you paid £10,000 in the tax year for which you are filing your return, you will make the first Payment on Account of £5,000 on 31st January, and another payment of £5,000 on 31st July. This will include Class 4 National Insurance Contributions where applicable, but not student loan repayments or Capital Gains Tax.

There are some circumstances in which a Payment on Account will not be due. If your tax bill for the previous year was less than £1,000 after PAYE or other deductions at source, no Payment on Account is necessary. Similarly, no Payment on Account will be due if, in the previous tax year, 80 per cent or more of your tax was deducted at source.

Your first payment on account is always painful but it is less so if you consider it really a deposit in your Revenue bank account . . . and that means more of the money in your bank account is yours to spend!
You can also apply to have the Payment on Account reduced if you have a good reason to believe that you income in the following year will be less; this is often the case with dividends as a year with a high dividend declaration may be followed by a year with lower dividends and hence a lower overall tax bill. However be warned, if you do lower your payment on account and it turns out that you should have paid more the Revenue could charge you interest on the underpayment.

If you believe that you have a case to reduce your Payment on Account for the 31st July please do get in touch asap and we can review your case and, if appropriate, make an application to HMRC to do so.

Go Cardless

Fri, 29 Jun 2018 10:00:00 GMT

Go Cardless – simple, safe and digital way of paying by direct debit

At M:Power Accounting we constantly strive to find software and app’s that will improve the service that we can give you; data back-up for Xero accounts, a fully supported IT server and Auto Entry for managing your receipts (please see previous blogs if you’re interested in any of these services). Well, this time, unashamedly, we are introducing a new service that will improve the way that you can pay us!

Go Cardless is a simple, safe and digital way of paying by direct debit. It can all be done online so no need to fill out and post bank paper forms and it comes with all the safeguards that the direct debit system demands. The funds can be collected on the due date of your invoice or on your preferred date within the month, you just need to let us know your preference.

Switching to Direct Debit will save you the hassle of manually paying each month. Even if you are paying a fixed amount by standing order sometimes invoices may differ from month to month; by using Go Cardless the amount on the invoice will be taken and you won’t need to remember to change the standing order or make an additional payment. You’ll be notified of any upcoming payments, and you can cancel them whenever you want. What’s more, the Direct Debit Guarantee makes this the safest way to pay. To see more about Go Cardless please use this link to their website:

gocardless.com

I will email the web link for setting up a direct debit to clients by separate copy but if you do have any questions or would like to know more about this service please don’t hesitate to contact us.

Electric Dream

Mon, 25 Jun 2018 14:20:00 GMT

Tesla – an electric dream or an expensive nightmare?

A client recently asked me to look into the implications of buying an electric company car. There are certainly some very strong incentives to go electric if you are looking to buy a company car including the following:

Well that is the stuff that dreams are made of, isn’t’ it? Or will this dream turn into a nightmare.

Firstly, though you will be paying reduced Class 1A contributions (2018-19 13% Tesla, 37% combustion engine) you will still have to pay these. The same is true for the BiK. The company car tax payable by an employee is based on the vehicle’s P11D value multiplied by the appropriate BiK rate (determined by the car’s CO2 and fuel type) and the employee’s income tax rate providing significant savings over high CO2 emitting vehicles. Battery electric vehicles offer the lowest BiK rate of any fuel type. A P11D will have to be submitted to the Revenue which may be an additional cost to your company. There will be less to pay than on a conventional combustion car but you will still have to pay further tax and national insurance contributions.

The 100% write down is again a popular incentive but two things to be aware of. Firstly, when you sell the vehicle you may have to repay some of the write down depending on whether a profit was made. Secondly, as a car with dual purpose, ie, both business and personal, you won’t be able to reclaim the VAT although some relief is allowable through the corporation tax on the write down. Finally, these incentives are only available on a new purchase and not on second hand vehicles.

So, dream or nightmare? IF you are convinced that a company car is the way forward, or already have one, then a look at the electric market is well worth it. However, I still believe that the most tax efficient way to manage your business miles is to use a personal car and claim mileage. Furthermore, the rates and incentives are continually changing and the electric car market is relatively new; what seems like the dream like investment now could become that tax nightmare in the future!

If you’d like further information about electric cars please do contact us.

Any questions please do get in touch

Royal Entertainment

Mon, 21 May 2018 10:06:00 GMT

A right royal weekend of entertainment

Well, what a weekend that was! A royal wedding and the FA cup final, red white and blue; perhaps more blue than the other colours (that’s for you John). Personally, I loved the royal wedding and good luck to Harry and Megan. The weather was perfect and I’m sure that many of you, like myself, will have attended a party over the weekend to celebrate; it was certainly a weekend for entertaining but if you wanted to pass this off as a business expenses you would have run into some penalties, and we’re not talking about the football!

As a rule, non-staff entertaining is not allowable for corporation tax purposes. However, just because they do not attract a corporation tax saving doesn’t mean they can’t still be put through your company as a cost, which is usually better than paying for them out of your own pocket.

As with any business costs they must be wholly and exclusively incurred for the purposes of your business. If the meetings are not considered to be for ‘business purposes’ then HMRC can determine that the entertaining cost was incurred largely to benefit yourself as the director and as such should be treated as a taxable benefit in kind and attract personal tax and national insurance. And you do not want to have to complete a P11D return to the Revenue if you don’t need to.

The grey area here is what is considered to be business purposes and where a line can be drawn to distinguish between those entertaining costs that would qualify and those that would not. HMRC currently explain the differences between business and non-business entertainment as the below:

An example of an entertaining expense that would qualify for business purposes would be meeting a client or potential new client at a reasonably priced restaurant for a relatively inexpensive lunch to discuss a potential upcoming contract. In this scenario there should be no personal tax issues for yourself so long as reasonable records are kept to justify the expenditure, such as who you met and the reasons for the meeting. The lack of decent record keeping, in some scenarios, is likely to be the deciding factor should HMRC investigate. Employing the services of a properly qualified bookkeeper will ensure that your books will be kept properly so any questions by HMRC can be easily answered.

An example of an entertaining expense that may not qualify as a business expense would be meeting a client, who also happens to be a friend, at an exclusive restaurant with an a expensive wine list. HMRC may argue that this is excessive and there is a clear personal benefit to yourself and as such it should be treated as a taxable benefit. However, in true Revenue fashion, there is no clear guidance given, so it is largely down to the business owner to police and decide on a case-by-case basis; again, the advice of a professional qualified bookkeeper will be invaluable to keeping you safe.

I hope that you enjoyed your weekend, if only for the lovely sunshine and there’s no benefit in kind penalty in kind for that yet – just had to use the word penalty one more time (John)!

Magic stuff

Fri, 18 May 2018 10:02:00 GMT

Corporation Tax – how the Professionals wave their magic wand – or is dark arts?

Corporation tax should be easy shouldn’t it – look at the Profit and Loss and then take 19% off to give to the Tax Man. But why, when you get your accounts and tax review, it doesn’t add up to that magical 19. What dark arts are being used in the background?

Now I’m not a Snape, rather saw myself in Gryffindor. So with that in mind let’s explain why it isn’t dark arts.

Well, firstly, from the 6th April 2017 corporation tax reduced to 19. However, us that wave the magic wand need to take your profits and split them between the 20% and 19% depending on where your year end is. First bit of magic!

Next is the really dark art of disallowable expenses. There are certain expenses that you can’t claim tax relief against; client entertaining, depreciation charges and fines and penalties being the top three. Oh, that speeding fine on the Firebolt, sorry, not claimable for tax purposes; or when you took Dumbledore out for a meal. However, one piece of good news is that although depreciation isn’t allowable for tax relief most of the assets you purchase you will be able to claim 100% of Annual Investment Allowance (AIA) in the first year; guess that’s a win to Griffindor.

Finally, if you’ve had losses in the previous year you can carry this forward and set against current year profits. This is especially important to start ups who may well have losses to start off with. Well perhaps the Slytherin Revenue aren’t so bad after all! All thanks to Snape.

If you have any questions regarding your corporation tax liability following this article please do contact us and I will do my best to wave my magic want and make it go away.

Latest news – behind the scenes

Mon, 30 Apr 2018 12:02:00 GMT

Latest news – behind the scenes

So this week I thought I’d bring you up to date with M:Power news. Keeping up to date on tax law and accounting principles, finding new software and applications that will assist our clients and continuing to build our network are all examples of the work that goes on behind the scenes to ensure that you get the best service possible.

Firstly, the migration to our own dedicated server is now complete. This not only means that all your personal data is safely secured but also all members of the team can access our systems where ever they are working. No files are held on a laptop and everything is centrally run. Let’s put this in simple words – when I drop my laptop (not unheard of!) I can just get another one out of the box, do a few updates, and hey presto, I’m up and running again. And that’s the same for all of the M:Power team.

The move to a dedicated server was partly driven by the oncoming onslaught of GDPR. We now have our policy in place, which will be uploaded to our website shortly. The momentum for GDPR compliance is building as the 25th May is now less than a month away. You all will have probably noticed an increase in the amount of emails starting something like, “We don’t want to lose touch with you . . . “. If you do have any concerns about how GDPR is going to affect your business please do contact us. I have also published some articles on this subject which you can find on our website blogs :

Keeping on an IT theme, many of you use Xero and I would like to look at a blog I published in November introducing the Backup My Books. I believe that this is an option that you should consider to ensure that your financial data is completely secure. Again, please contact us if you would like to put this in place.

The final piece of news is that we are pleased to announce that M:Power Accounting has been awarded Silver Partner status with Xero. Both Claudia and I have passed the Xero accreditation which means that we can support your accounting records to Xero’s sliver standard. I have always had a vision to provide a bookkeeping and accounting service which is not dependent on one individual; this step with our silver accreditation is just one that has been taken to ensure that this is possible.

I hope you find our latest news interesting as I think it is important for our clients to know what is going on behind the scenes. Business never stays still . . . . and neither does M:Power Accounting.

Travel and subsistence – some basics

Mon, 23 Apr 2018 12:21:00 GMT

Travel and subsistence – some basics

Our third Thorny Issue article will look at travel and subsistence. These rules do vary depending on whether you are self-employed, employed or a company director. However, there is one thing in common, any expenses must be wholly and exclusively business related. This applies all the way through. Combined business and personal travel or subsistence expenses are not allowed. You must always deduct any non-business element.

For the purposes of this article we will focus on the self-employed and company directors.

You can claim for travel and subsistence when:

However, it cannot be claimed when:

Where is my usual place of work?

The first thing you need to think about is your base of work, so that you can work out what is your ordinary commute. If you rent working space anywhere then it is generally straightforward as that will be your base of work. If you mainly work from home then that will usually be your base. If you don’t rent space and are generally out and about e.g. a plumber, then your base might also be home. This is particularly true if you are claiming use of home as an office as part of your expenses.

You can’t include any expenses for your journey between your home and base of work as this is considered to be part of your ordinary commute. Other travel outside the ordinary commute is generally allowed provided it is “wholly and exclusively” for work purposes. Using a private car the best way to reclaim your cost of travel is by pence per mile and you can also claim other travel expenses such as airfares, rail, taxis, bus, congestion charge, toll charges. If you drive a van, eg, a plumber again, the whole cost of your vehicle can be reclaimed as a company vehicle.

You can’t claim for penalties and fines, so no speeding or dodgy parking. You also can’t claim for Oyster card top-ups if you also use the card for personal travel. Although it sounds picky why not have two cards. You can also use debit and credit cards so it makes it even easier to put the journey on either your personal or business bank account.

What meals can I claim?

“Everyone must eat to live” says the tax office, which means that in general you can’t include your day to day meals as a business expense. However, there is recognition that meals while out and about traveling can end up costing more. The question then becomes is the journey one that you make infrequently and outside your normal pattern of work?

If the travel is part of your normal pattern of work then you can’t have any meals during the day e.g. a plumber travels and works out and about at various client sites. The travel costs are allowable but the subsistence is not because it is part of the normal work pattern. This also applies to contractors who mainly work in the same office. For example, a contractor who works in London can’t claim lunch or coffee expenses as the office would be deemed their place of work and such expenses would be within a normal pattern of work.

If the journey is more of a one-off and not part of the normal work pattern then you can include meal expenses during the day e.g. an architect working from home can include both travel and meals costs for a whole day out at a conference.

Staying away

If your business requires a trip with an overnight stay then you can claim for the cost of the accommodation and reasonable expenses for the evening meal and breakfast.

However, beware – anything claimed for locations too close to your base of work might not be considered to be subsistence and also bear in mind that the HMRC guidance says reasonable costs. So the Michelin star restaurant may be out of bounds while away on a business trip. Also alcohol is not subsistence unless it is purchased with a meal and even then it must be reasonable e.g. one drink or half a bottle of wine.

These rules really apply for both the self-employed and Company Directors. It is important that Company Directors only claim back the actual cost or they may find that their reimbursable expenses should be reported via the P11D. This extra level of reporting is overcome by paying for expenses directly from the business either by debit or credit card.

Recently, further rules have been brought in to further clamp down on what travel and subsistence can, and can’t be claimed. If you do have any specific questions please do contact us to discuss further.

Wear can you claim back the cost of company clothes?

Sun, 15 Apr 2018 13:21:00 GMT

The second in the series is to do with where you can, and can’t claim back the cost of clothing. This is an issue originally looked at back last September but as a thorny issue it will be good to revisit now.

I’m often the bearer of bad news when clients submit receipts for new suits, shirts, shoes and dresses as they will be worn at work. The issue is that the tax man won’t see it this way as such items can be worn for both work and personal reasons. Do you really have two wardrobes, one for work suits and the other for social.

Clothing that can be claimed includes:

Protective clothing, if relevant to the business, such as:

Specialist clothing, if relevant to the business, such as:

Unfortunately clothing that can’t be claimed for are:

However, if the clothing is logoed – in any way – then it can be claimed for. So t-shirts either with printed or sewn logos would be accepted as tax deductible.

This means if you want to claim your Armani clothes you just need to print them up with your company logo…

Thorny issues

Mon, 09 Apr 2018 10:27:00 GMT

So, with Easter over I’ve decided to do a series of “thorny questions”! OK, I know you want to switch off now but don’t because the issues raised are important and . . . . . I have thrown a random question into the blog and the first to email me the correct answer will receive a prize – yes, you really will, so please continue reading.

I’m going to take a couple of issues that often crop up when I speak with clients. This week we’re going to look at rechargeable expenses with specific reference to the VAT treatment. I know, you all can’t wait to read on – if only for the prize.

So, rechargeable expenses are reasonably easy until you get to the VAT treatment. If you incur an expense on behalf of a client you can recharge this to them – simples. If you add a mark up, which is business savy, the amount you pay will be less than the amount you charge so you will have a profit which will incur tax, whether that is corporation or self assessment. However, it gets a little bit more complicated when you have to consider VAT.

The basic rule is that the VAT liability on recharged expenses follows the liability of the main supply of the goods and services – in other words you should be charging VAT whether or not the original invoice had VAT on it, or not, if you get my drift.

Confused – well, I would be too if I was you!

So, you need to distinguish recharged expenses from disbursements. HMRC allow disbursements to be passed on without adding VAT, but there are a lot of conditions to pass to use this caveat.
A disbursement is basically an expense you pay on behalf of your customer as agent, it is an amount the customer has the obligation to pay and you are authorised by the customer to pay it on their behalf. In this case you do not need to add VAT.

Question – which elephants have the biggest ears, African or Indian? See, didn’t leave it to the end just in case people just scrolled down!

With a recharge, you would normally add VAT to the gross amount ie a hotel bill for £100 plus £20 VAT, you recharge the customer £120 plus VAT. However if it is a disbursement you would not have to add the VAT. It all depends what is in the contracts and whether the expense passes the HMRC rule.

So, the bottom line is that if your customers are VAT registered then it makes little difference. Make sure you are clear on what is an expense or disbursement, and it is a very fine line. If you have any questions on this please do get in touch.

Next week we’ll look at motoring expenses – so get your skateboards out…

5th April; end of the tax year

Mon, 26 Mar 2018 15:03:00 GMT

For many of us in the accounting world the end of the tax year is similar to Chinese New Year, except without the fireworks and parties; perhaps we should think of adopting this style!

As the end of March approaches I also have a pain in the neck! Not what you think, though dealing with the HMRC does often cause it. My neck pain is caused by having to look two ways at once – both forward to the new tax thresholds for the 2018-19 year and back to ensure that my clients have maximised their earnings potential for the year that is bowing out.

With that in mind here are a few pointers to consider:

These are just a few headlines for the new tax year. If you have any specific questions please do get in touch as I know there are other areas of tax that you are affected by.

I also need to reiterate my favourite sentence – the 31st January 2019 is a deadline and not a target for your self-assessment returns. Please start pulling together information for your personal tax return as soon as possible. I will be contacting all my self-assessment clients within the next couple of months so we can get the ball rolling. The sooner you know your tax liability the better – well possibly?!

Paula

IT security at MPower

Fri, 16 Mar 2018 12:38:00 GMT

M:Power Accounting is pleased to announce that we have engaged the services of Virtual Tin for IT support. Please find important information below about how this change in our data platform will affect you:

1: All your data will be held on a dedicated M:Power Server
All the data that I hold, including your client information, will now be held on a secure server. Systems such as Onedrive and Dropbox provide excellent cloud based availability but there are some fundamental issues. Firstly, you don’t know where the servers are geographically based which means your data could be held in various countries outside of the EU and therefore would not be subject to the EU regulations on data security. I believe that data security is a vital issue. Secondly, these systems provide no back up, therefore it you deleted a vital file – it’s gone!! There is no argument on the convenience of cloud based storage but has the drive for convenience overshadowed the necessity for security?

2: Emails
All our working emails will stay the same so please do continue to use the emails that you have. However, over the weekend we will not be able to access them as the migration to our new platform takes place. All should be back to normal on Monday but if there are any technical problems we will let you know.

3: Background protection
All our emails and data will be continually monitored to prevent SPAM email being sent from M:Power and any new cyber threats being able to corrupt our data. Just last week my website was attacked and within an hour period we were receiving emails from a China robot every 10 seconds to our contact form on the website. Although there was no actual hack into our data the disruption this could have caused if it wasn’t stopped by Virtual Tin could have been significant. I have now removed the contact us form from the website which is actually the general guidance given out; if you do have contact forms please firstly check whether you really need them and the secondly ensure that you have sufficient protection from robots.

The reasons why I have moved to a secure server may also be applicable to your business; I cannot stress enough the importance of data security. Whatever data you hold, especially if it is client related, you need to be sure that it is safe and with new GDPR being enforced by July there has never been a time to more mindful of data security.

Please find a link below to Virtual Tin – if you have any concerns please contact them and they will be able to provide a service to meet your needs.

https://www.virtualtin.com/

Twelve steps to GDPR nirvana; the final cream crackers!

Mon, 05 Mar 2018 11:26:00 GMT

Twelve Steps to GDPR nirvana – the final cream crackers!

The Information Commissioner’s Office (ICO) have published a twelve-step guide for compliance; we looked at the first of those steps last week but as I said then is it a bit like trying to eat cream crackers. So, tea at the ready, let’s look at the second six steps and how they relate to the small business.

1. Consent

You should review how you seek, record and manage consent and whether you need to make any changes. Refresh existing consents now if they don’t meet the GDPR standard. The ICO has published detailed guidance on consent under the GDPR, and you can use their consent checklist to review your practices. Consent must be freely given, specific, informed and unambiguous. There must be a positive opt-in – consent cannot be inferred from silence, pre-ticked boxes or inactivity. It must also be separate from other terms and conditions, and you will need to have simple ways for people to withdraw consent. Consent has to be verifiable and individuals generally have more rights where you rely on consent to process their data. You are not required to automatically ‘repaper’ or refresh all existing DPA consents in preparation for the GDPR. But if you rely on individuals’ consent to process their data, make sure it will meet the GDPR standard on being specific, granular, clear, prominent, opt-in, properly documented and easily withdrawn. If not, alter your consent mechanisms and seek fresh GDPR-compliant consent, or find an alternative to consent.

To me, this is one of the biggest GDPR impacts and I would urge you all to start now looking at this area.

2. Children

You should start thinking now about whether you need to put systems in place to verify individuals’ ages and to obtain parental or guardian consent for any data processing activity.
There are specific rules that bring special attention for children’s personal data and if you believe that this area of compliance will impact your business please do seek further ICO guidance.

3. Data Breaches

You should make sure you have the right procedures in place to detect, report and investigate a personal data breach. This is an area that will impact larger corporations more as they will now be legally responsible for disclosing breaches at the time they happen, meaning that any member of the public will know straight away if their personal data has been affected; this can only be a good thing.

For smaller entities I believe that we should act by looking at how we hold our data and what risks there are. I have an announcement to make next week about how M:Power has acted to properly secure the personal data it holds as I have already reviewed this step to ensure that your data is as safe as it can be.

4. Data Protection Impact Assessment

It has always been good practice to adopt a privacy by design approach and to carry out a Privacy Impact Assessment (PIA) as part of this. However, the GDPR makes privacy by design an express legal requirement, under the term ‘data protection by design and by default’. It also makes PIAs – referred to as ‘Data Protection Impact Assessments’ or DPIAs – mandatory in certain circumstances. If you feel that a DPIA may be mandatory in your case, please consult the ICO guidance.

It is good for all small business to carry out an assessment and document this. The assessment will identify the most effective way to comply with GDPR obligations and also meet individuals’ expectations of privacy. And the PIA is an integral part of taking a privacy by design approach. Although this may sound slightly scary it should not take too long for you to complete a PIA and it will show if you do have any areas that need improvement or of high risk.

Nearly there – just two more crackers to go . . .

5. Data Protection Officers

You should designate someone to take responsibility for data protection compliance and assess where this role will sit within your organisation’s structure and governance arrangements. In most cases that will be you!

6. International

If you do operate in more than one EU member state, you will need to determine your lead supervising state and document this. For most small business in the UK this authority will be the UK but if you do have a more complicated framework with more than a single establishment in the UK then again, I would advise you review the ICO guidance for this area.

So, time for that glug of tea as we are now done. All entities in the UK that hold personal data in whatever form are legally required to comply to the GDPR requirements. As I said right at the beginning those of us who were already working under DPA are potentially most of the way there but it is vital that you consider these twelve steps and act on them now to ensure your compliance. I believe that, with carefully consideration, this will not become just another administration burden and the quicker you act the easier it will be to ensure that you are compliance by 25th May; that is the way to achieve GDPR nirvana.

Twelve Steps to GDPR nirvana… the first six cream crackers!

Mon, 26 Feb 2018 10:38:00 GMT

Twelve Steps to GDPR nirvana… the first six cream crackers!

Last week we looked at a general introduction to GDPR – if you missed that article please do go and look on our website where that, and all my weekly newsletters, are published. This time around we shall actually get stuck in so go get a cuppa tea – you’re going to need it!

The Information Commissioner’s Office (ICO) have published a twelve-step guide for compliance; let’s look at six of those steps and how they relate to the small business – I’d do more but it’s a bit like trying to eat 12 cream crackers at one time!!!

1. Awareness

You need to know that the law is changing to the GDPR. Many of us are already compliant under the Data Protection Act (DPA) so what we need to do is assess the impact that the new regulations will have on our organisations and what we need to do to become compliant.

2. What information do you hold?

You should document what personal data you hold, where it came from and who you share it with. You may need to undertake an information audit. This can be quite a simple task but you really need to take a couple of hours to review the information you hold. Doing this will enable you to comply to the GDPR’s accountability principle, which requires that organisations demonstrate that they have written data protection policies.

3. Communication Privacy information

When you collect personal data you currently have to give people certain information, such as your identity and how you intend to use their information. This can be done through a privacy notice or, for many small companies, at the time you collect the data. Under the GDPR there are some additional things you will have to tell people. For example, you will need to explain your lawful basis for processing the data, your data retention periods and that individuals have a right to complain to the ICO if they think there is a problem with the way you are handling their data.

4. Individuals Rights

On the whole, the rights individuals will enjoy under the GDPR are the same as those under the DPA but with some significant enhancements. If you are geared up to give individuals their rights now, then the transition to the GDPR should be relatively easy. This is a good time to check your procedures and to work out how you would react if someone asks to have their personal data deleted.

5. Subject Access Requests

So, if you are contacted by a client of whom you hold data you need a policy on how you will handle such a request. Again, this is not difficult but in that morning you take out to contemplate GDPR make writing a Subject Access Request Policy one of your goals.

6. Lawful Basis for Processing Personal Data

You will also have to explain your lawful basis for processing personal data when you answer a subject access request. The lawful bases in the GDPR are broadly the same as the conditions for processing in the DPA. It should be possible to review the types of processing activities you carry out and to identify your lawful basis for doing so. You should document your lawful bases in order to comply with the GDPR’s accountability requirements.

…so, with six cream crackers in our mouth I think we’re about dried out! Go have a sip of your tea! We still have consent, breaches and protection of children to go through!

I hope that this blog, dry as it is, does give you some positive pointers about the new GDPR. I honestly believe that it is not as bad as it sounds and with some planning every small business can easily achieve compliance.

Next week we will look at the next six steps and what you can do to reach that GDPR nirvana.

GDPR: help or hindrance?

Mon, 19 Feb 2018 11:38:00 GMT

GDPR – a help or a hindrance?

So, for the uninitiated, GDPR stands for General Data Protection Regulations. It’s basically the Data Protection Act (DPA) on speed!

The new regulations, from the European Parliament, will come into force on 25th May 2018, and when they say come into force, they mean come into force. Everyone who holds any personal data of any sort in any way will need to comply. Now, before we go all “what have the European’s done for us”, let’s consider the world we currently live in. Well publicised hacks of international mega-corporates show the importance of cyber security in todays world, but let’s not ‘Talk Talk’ about that now! I actually believe that ensuring personal data security is more important now than ever and although the introduction of this new legislation may mean we have a few more policies to write surely it’s worthwhile.

Over a series of articles, I will unpack what this legislation means for the small business and what we need to do to ensure that we are compliant.

The first, and I think most important point to make, is that many of the GDPR’s main concepts and principles are much the same as those currently under DPA, so if you are complying properly with the current law then most of your approach to compliance will remain valid under GDPR and that’s the starting block upon which we will build. Now, whether you are compliant under DPA is something you will need to assess but I’m going to aim my articles with a view that you are.

It is essential to plan your approach to GDPR compliance now – although the 25th May seems in the future it will come around quickly. You will need to gain a ‘buy in’ from key people in your organisation; for many of you this may only mean a conversation with yourself, something I do regularly (although I’m in two minds about that) or with your co-directors. You may need, for example, to put new procedures in place to deal with the GDPR’s new transparency and individuals’ rights provisions; we’ll come onto that later. The GDPR does place greater emphasis on the documentation that you must keep to demonstrate accountability. One important aspect of this is to review the contracts and other arrangements you have in place when sharing data with other organisations. For myself, I am relishing the moment I approach HMRC for a copy of their data compliance!

Some parts of the GDPR will have more of an impact on some organisations than on others (for example, the provisions relating to profiling or children’s data). So, if I can leave you with any homework now it would be to map out which parts of the GDPR will have the greatest impact on your business model, though please don’t send it in for marking!

Next week we will start looking at the twelve step process for GDPR nirvana – that’s what I’m going to call compliance from now on!!!

Expenses, and an office from home

Thu, 08 Feb 2018 14:25:00 GMT

An office from home – how to get the most from expenses allowed

So, whether you convert your loft or have some office space in a room many of us are now opting to work from home. Any why not, there are great benefits to be had and it also means that the coffee round is always only for one! I am often asked about what expenses can be claimed for someone working from home so here’s a look at what you can do and what to avoid.

HMRC has provided a simplified method, where you count up the number of hours you work each month and use the HMRC’s simplified expenses rates for sole traders – please see the below:

Hours per month: Flat rate per month:
25 to 50 £10
51 to 100 £18
101 or more £26

OK – well don’t spend it all at once!

The key issue here is keeping a record of the hours you work and you will inevitably have worked more hours than you think as with an office at home you do tend to pop in and just respond to that email or check over that work issue. So, although using this simplified method may sound appealing you won’t get the most from your expenses and for just a little more work you will be able to recoup far more from your office at home. And note – the table is for sole traders! Those operating through a Ltd Company, you need to read the next bit carefully.

The other method is known as the Proportional Cost Method, and it’s not as scary as it sounds.
You need to work out what the actual running costs of your home are. If you own a property this can include mortgage interest but not capital repayments. If you rent then it is simply the rental charge. Other costs which you need to record include gas, electricity, insurance, service charges, cleaning and council tax.
You then need to work out what proportion of these costs would be fair to allocate to your business. The simple way of doing this is to firstly work out how many rooms you have in your house excluding bathrooms, kitchens and hallways. You then need to work out what % of the time you use one of the rooms for business use. I know it sounds like a bit of work, which it is, but once it’s done you’ll only need to review it once a year to check it is still accurate.

However, it is important that you don’t use your office room entirely for business – keep at least a small element of the room for personal use as this protects you from any potential capital gains tax issues when you sell your house.

If you are a Ltd Company I would also recommend putting an agreement in place between you and your company for the use of the office and the amount to be paid. This does protect you if the taxman cometh. So, if you are operating through a Ltd Company then you really will only be able to use this method of apportioning costs.

This is quite a complex area so please do contact us if you need to look at how to claim the correct expenses for your office at home.

Next week I’m going to plunge into GDPR (General Data Protection Regulations). Although not specifically an accounting issue it is going to affect every business in the UK so some level of understanding is essential. I cannot stress how important it is to understand this new regulation as compliance is due by the 25th May – oh, happy days!

An office at home…

Mon, 05 Feb 2018 11:00:00 GMT

An office at home

I am often asked about setting up an office at home and what costs can be claimed through the business. Many of us will work from home even if we have an office, myself included. So, over the next few weeks I’m going to explore the tax implications of working from home and what can and can’t be included! Today we will look at converting some of your home into an office.

The main building costs of any conversion at home, whether that be a loft or another room, will be treated as capital expenditure on your personal residence, so you won’t be able to put any of these costs through your business.

Your personal property will be owned by you personally, rather than being owned by your company, so the conversion work could not be treated as a business capital expense. Even if your property was owned by your company the conversion costs are going to be mainly of a capital nature which means that they are typically not eligible for tax relief. What I’m saying in plain terms is that the money spent on conversion CAN’T BE INCLUDED FOR TAX PURPOSES however you do it.

So, if you are considering converting any area there will be some specific expenses related to your new office that you can put through your company if they are 100% for your business office, these will typically include:

To be safe make sure any of these items are invoiced to your company. If, for example, you are installing carpet in the whole area, you will need to ask the carpet provider to raise two invoices – one invoice addressed to your company for the element related to your new office and one addressed to you personally for the rest of the work.
It is a minefield which is why it is so important that you consult a professional when you consider setting up an office at home. Please do contact us is you have any questions.
Next week I will look at what expenses you can claim when you work from home…

Carillion Saga…

Mon, 29 Jan 2018 12:46:00 GMT

The saga of Carillion continues with the news only this morning showing that payments into the company pension fund were missed as its troubles grew though dividend payments to shareholders and bosses bonuses continued. All the signs were there that Carillion was a bad debt waiting to happen and many of the companies now caught up in its collapse may be wondering why they didn’t act earlier to recover their funds. What can you do when you are seriously looking down the barrel of a bad debt to ensure the bullet doesn’t hit you squarely between the eyes?

1. Assess the situation carefully. Is the non-payment due to poor administration or the company going it administration? The more you build a relationship with your client which we talked about in the last blog the more likely you are to be able to gauge the reason for non-payment.
2. Ensure that you keep a full set of notes when you begin credit chasing in earnest. Most modern software packages will enable you to do this and it gives a concise record of the communication you’ve had with the client and the actions you have taken. It is valuable information when you are negotiating with the client as you can give exact details of the exchanges you’ve had with the company and will also be important if you decide to go to court to reclaim your debt.
3. I’m going to mention using legal measures to reclaim your debt at this point. I have used Money Claim Online (MCOL) which is effectively going through the small claims court to issue proceedings when a debt is overdue. The online service, MCOL, is very efficient and cost effective. However, my experience is that if you get to this point the debt is almost certain lost but you may be able to gain the satisfaction of being able to enforce a County Court Judgement (CCJ) against the debtor. You also could use solicitors at this point who may be able to induce your debtor to pay with the use of legal letters but again, my opinion, is it is much better to work out your dispute in relationship with your client rather than using the force of the law, which unfortunately can be a path into nothing.
4. My last two points are around what YOU can do rather than going legal. Through negotiation there is much you can achieve so go and “do deals”. My understanding is that the Carillion unsecured creditors will be lucky to receive 1p in the £1 of debt they have. In many situations there just isn’t enough funds in the company for any pay out to an unsecured creditor. I have helped many of my clients reclaim the vast majority of their debt by offering payment terms of a certain amount per month or giving inducements so that if an amount is paid immediately then the rest will be credited off – you will certainly get more than a penny in the pound by doing this.
5. There’s nothing quite like nagging – it’s the dripping tap syndrome that can ultimately work. Just keep contacting the customer until finally they just give in and make sure your payment is one that happens. In fact one of my favourite exchanges with a client’s customer occurred due to this strategy. I knew that the customer was in trouble and that I only had a small amount of time to secure the funds; we had always had a good relationship and I made it my mission to call him twice a week as he promised payment though none arrived. In the end I made him an offer he couldn’t refuse, having a bit of a sweet tooth, and promised to send him his favourite confectionery if he actually sent the payment. If worked, the cheque came through and was honoured and I duly despatched a number of Walnut Whips to him. Yes, this story is a bit flippant but shows what you can achieve if you are bold enough to be creative!

If any of the points raised in the last two articles has struck a chord please do get in touch with us as we have years of experience with credit control. Your business is too important to let it fail due to a bad debt and professional assistance from the start can help to protect you against this.

Paula

Carillion Collapse and Credit Control – what can we learn?

Mon, 22 Jan 2018 10:00:00 GMT

Carillion Collapse and Credit Control – what can we learn?

The collapse of Carillion last week was not only a huge blow to the economy but also proved to be devastating to many small businesses. It’s like a stone being thrown into a water; there is a large plop as it lands but then the ripples go out so that in the end all the water is disrupted! Yes, the indications were there that this business was indeed in trouble but how many of those small businesses that had credit lines with Carillion noticed; not many considering the reports in the news.

What, as small businesses can we do to protect ourselves from such a situation? Whether we deal with large business or have a significant smaller client, the threat of a bad debt is always present, and it only takes one to seriously jeopardise the stability of any company. Credit Control is very much a skill of its own and M:Power Accounting has had years of experience in this field. Over the next two weeks I’m going to give you some pointers on how you can reduce the threat of bad debt. In this article we’ll look at what you can do to protect yourself and then next week we’ll explore the actions necessary when it looks like it’s going wrong.

Here are my five pointers for effect credit control:

Two notes I would add to invoices are – “Any disputes regarding this invoice need to be raised within 5 working days”

You can change the timescale to suit your business but the important issue here is that it means that they can’t dispute the invoice when you chase it in a months time, a classic way for a client to avoid payment.
“We reserve the right to charge interest on any outstanding amounts at the rate of 8% above bank base rate per annum under the Late Payment of Commercial Debts (Interest) Act 1998. Such interest will begin to accrue from 30 days of this invoice. We also reserve the right to seek compensation for any debt recovery costs incurred if this invoice is not paid to terms”

Again, write the terms to suit your business but by including this term you can charge interest on overdue debt and is often enough to put potential bad payers off.

By taking these actions you are basically creating a culture that expects payment. Clients that know they can skip your payment and get away with it will do so; if they understand that you don’t tolerate non payment you find that your payment goes up to the top of the list!

Next week I’ll give you some hints on what to do when you are concerned that one of your clients can’t pay.

31/1/18 – a deadline not a target!

Mon, 15 Jan 2018 13:04:00 GMT

31st January – dealing with personal tax affairs

It wouldn’t be January and I wouldn’t be dealing with personal tax affairs if I didn’t at some point write this blog.

For many the 31st of January does become a target rather than a deadline and some who haven’t yet started their returns are jokingly boasting about how close to midnight they may be able to get before filing. Be careful with this approach though as already HMRC systems are feeling the brunt of the January filing frenzy and the risk of them going down is ever increasing!

Here are some recommendations to help you avoid the January filing crunch:

With only a couple of returns to complete I’m pleased that my clients have, for the most, followed the advice above; I also know how grateful they are not having to complete the returns, as shown by the lovely gift I received just last week. If you are still in that position where your return looms over you then perhaps next year adopt a different approach and wear that halo of smugness while all around are once again aiming for the target.

If you are struggling to finish your return or are not sure on what to do please contact us urgently. There are sometimes good reasons why a return is filed late but it is far easier to deal with such situations in negotiation with The Revenue and this will also mean strict fines can be averted.

Happy New Year!

Wed, 03 Jan 2018 14:54:00 GMT

New Year – and a new tax regime

MTD?! Does this mean “More Tax Demands”? Yes, most certainly! Will it mean “My Tax Diminishes! I’ll let you answer that one!

MTD, Making Tax Digital – this is The Revenue’s present to us all – and it’s not one you can take back to the shops and exchange!

According to the policy paper published by HM Customs and Excise in July 2017 Making Tax Digital will “make it easier for individuals and businesses to get their tax right and keep on top of their affairs – meaning the end of the end of the annual tax return for millions.”

If that sounds like good news please beware. My article published on the 2nd October 2017 and available on the website discussed the pitfalls of MTD and its application to personal tax returns. And that didn’t even touch on the issue of dynamic tax coding – one I will save for a later article.

MTD will affect the way we report practically every tax; for VAT registered businesses this may come sooner than you think. Draft VAT regulations, and a notice to require taxpayers to comply with MTD reporting, were released for consultation on 18th December 2017, with a deadline for commenting set at 9th February 2018. This consultation period fits neatly over the busiest period for accountants and tax advisers, thus reducing the likelihood of detailed feedback from those who will be at the sharp end of the MTD regime, but I’m sure that is just a coincidence.

One of the main issues surrounds functional compatible software as only such software will be able to submit VAT returns under MTD. The HMRC portal for submitting VAT returns does not meet these standards. This means that companies using spreadsheets or other non-compliant software to calculate VAT and upload it to HMRC through their portal are not going to be MTD compliant. And we have till the 9th February to make sure the Revenue understands the further pressure this will put on small business.

MTD is one of the biggest changes in tax reporting in the UK for the past 20 years – it’s like The Revenue are playing catch up with the digital age. I will ensure that you are kept up to date with the new regulations and please do email me with any concerns that you may have.

Wishing you all a Prosperous New Year.

Christmas Gifts

Mon, 18 Dec 2017 20:51:00 GMT

What gifts can your business give?

So, as a business owner, what gifts can you give without upsetting the Christmas Taxman Grinch? Well, there are a few simple rules to follow:

Well, that’s just about put Christmas in a box! So, what can we do to make our clients feel special?

I like to spend time with my clients, which is the one thing that is very much appreciated. If we buy our own meal we can both put this expense down to subsistence, so it can be claimed in the company books. But more than that, more than tax, working together closely with clients is important to me. By building a good relationship we can work together to ensure continued success.

So, a very Merry Christmas to you all – and here’s to a prosperous New Year.

November Budget ’17

Wed, 22 Nov 2017 15:27:00 GMT

November Budget 2017

So, I’m sat here preparing my presentation for tonight on the budget – I guess I should be thankful it won’t be a long one!

The economic outlook has worsened with the OBR (Office of Budget Responsibility) reducing the forecast for growth. However, Phillip Hammond has increased spending with very little increase in tax revenues to bridge the gap. This means that borrowing will inevitably increase which means the notion of “balancing the books” seems to have gone out of the window.

On an everyday level for individuals and small business owners I would say the major headlines are:

I held my breath when Mr Hammond turned to the SME’s; if I had continue to hold my breath through this I would have had the ability to still exhale some at the end! To be honest unless you’re involved with the digital world, technology companies or the construction industry there was really very little there. Measures seemed to focus small tax regulations – the announcement on business rates being about staircase tax and a switch from RPI to CPI! There was just simply nothing to assist the majority of small business, many of which are already facing a squeezed bottom line after inflationary pressures and the implementation of auto enrolment pensions. And we mustn’t forget that the Spring Budget announcement that the dividend allowance will drop to £2,000 next April is still due to happen.

The SME was described as the backbone of the UK economy; well, with so little to support it back pain is inevitable which will mean that the investment in the NHS will be well needed.

Budget Build Up

Mon, 13 Nov 2017 10:03:00 GMT

Next week we will receive our second budget speech of the year from the Chancellor, Philip Hammond. Two budgets in one year – why?

Well, the UK is the only major advanced economy to make major changes to the tax system twice in a year. Many leading financial institutions have been calling for this to change so that there are less changes to the tax system promoting more stability and certainty. So, the move to a single fiscal event happened this year after the Spring Budget, with this second budget in November needed to switch to the new timetable that will be followed in future years.

From winter this year we expect that Finance Bills will be introduced following the budget with the aim of gaining Royal Assent in the spring before the start of the following tax year. In fact, this makes perfect sense as changes in tax law can be fully scrutinised before the year that they are going to take effect. An Autumn budget also means that tax changes will be announced well in advanced of the start of the tax year.

So, what becomes of the spring statement? The Office for Budget Responsibility (OBR) is required by law to produce two forecasts per year. This means a Spring Statement will still be made in response to the OBR forecast. Although the government do retain the option to make changes to fiscal policy in the Spring Statement it is more likely that they will use this to consider long term fiscal challenges and start any consultations that need to take place.

As a snap election was called following the Spring Budget the Financial Bill had to severely trimmed so that it could be passed in time. This means that many of the budget announcements were never made law, for example, the reduction in the tax free dividend allowance to £2 000 which I mentioned in my blog of September 18 ^th . I would be delighted if sense prevailed and this was dropped from the budget.

The usual media frenzy has started with speculation of what the budget will hold. However, after the snap election the current government does not hold the complete mandate that they wanted to do what they seemed necessary. I continue to petition Government on behalf of small business and am awaiting a response from Philip Hammond’s office after meeting with my MP, Rt Hon Greg Clark. Next week we will wait till Budget Day before posting our weekly blog; my hope is that it will be understanding to the cause of the modern SME but then, deep down, I do still believe in Santa!

Backup My Books

Mon, 06 Nov 2017 12:07:00 GMT

Keeping clients’ data safe

M:Power Accounting is pleased to announce the introduction of Backup My Books hosted by Ledgerscope. In an age of constant cyber attacks we continually strive to ensure our clients data is kept safely.

A couple of months ago I wrote to you all about our service of taking a hard drive back up of all client files held on the M:Power One Drive, a process that we continue to run weekly. However, I have been concerned for a while that we haven’t been able to back up data held in Xero which means that if anything goes wrong there is no fail safe.

Back Up My Books offers a regular back up of Xero data. There are two major advantages of this. Firstly, if cyber disaster strikes you your data is safe guarded. I am confident of Xero security but then so was Donald Trump with Twitter until his account got taken down. Xero’s security, against what we know will happen, is undeniable – but it’s what we don’t know, that is concerning. Secondly, especially for those clients managing their own books, this back up offers a roll back process. If you have a really bad week with your Xero record keeping you can roll back to the previous back up and start again!

For a monthly subscription of £10 you can have the assurance that your Xero data is safe, from attack, from disaster and possibly from Trump! If you are interested in taking up this service please do contact us and we will put this into place.

Brexit Uncertainty

Mon, 23 Oct 2017 15:05:00 GMT

Brexit Uncertainty

This post is in response to this article .

The uncertainty surrounding Brexit is certainly being felt at all levels of the economy. Many of our clients are small enterprises, commonly known as SME’s. The message I am getting from them is that times are difficult at the moment and that will be an outcome of uncertainty. The biggest lobbying groups are recognising the effect that a slow Brexit is having on our economy and impressing on the current Government the need to get on with it. Once the deals are made business in the UK can move on and take hold of the opportunities that are there to be had.

In my own way I am doing what I can to promote the cause of the SME. In October I had a meeting with the Rt Hon Greg Clark MP, Secretary of State for Business, Energy and Industrial Strategy, and put forward the case for small business. I am awaiting a letter that his office wrote to The Chancellor of the Exchequer. I was also fortunate enough to be invited to a Parliamentary breakfast last week and was able to pose the same questions to Chris Davies MP.

At M:Power Accounting we do more than look after your bookkeeping and tax affairs. We are also actively campaigning on the behalf of SME’s regarding Brexit and beyond. If you have any specific points you would like me to raise please do contact us by email .

ICB Speaker of the Year 2017

Wed, 18 Oct 2017 13:03:00 GMT

Institute of Certified Bookkeeper’s Speaker of the Year Award – Winner

MPower Accounting is proud to announce that founder, Paula Veysey-Smith, has won the Institute of Certified Bookkeeper’s Speaker of the Year Award.

Paula travels throughout the UK presenting on practical bookkeeping issues and giving motivational business talks.

Next month Paula will be talking at ‘Accountancy Live’ in Glasgow as well as visiting regional ICB branches in Wales and Surrey.

Further speaking dates for 2018 will be announced soon.

Making Tax Digital – but will it be correct?

Mon, 02 Oct 2017 14:27:00 GMT

Making Tax Digital – but will it be correct?

In this, the last in a series of three articles on self-assessment, we’ll have a quick look at the impact that the Revenue’s Making Tax Digital (MTD) initiative may have for many tax payers… and I use the work “may” deliberately because the implementation dates for MTD have been pushed further into the future.

In a nutshell, Making Tax Digital is just that, the moving of all the UK tax system’s online with income tax inline to be online by 2020. HMRC has already introduced the online personal tax account which enables individuals to view and manage their tax liabilities from the comfort of their own home. Returns, which currently can still be submitted in paper form, would have to filed online under MTD. Although for most this is not a major issue some groups, such as pensioners, may get left behind by the implementation of MTD.

However, a bigger concern for us all, is the Revenue’s “simple assessment form” where a form already completed by the Revenue’s Computers is sent to the tax payer. According to HMRC, millions will benefit, as the recipients, in theory, will swiftly read, comprehend and agree the figures sent to them – and of course then pay the bill presented to them. 400, 000 such forms are due to sent out before Christmas alone. In practice though, tax practitioners are already seeing high error rates and a failure of tax payers to understand the information that is being presented to them.

In many ways simple assessment is a welcome simplification and there is enough time for the Revenue to sort out any teething problems. However, it does raise the issue that the everyday tax payer does need to understand the return they are sent so they can be sure they are paying the correct tax.

If you do receive one of these forms and have any concerns at please do contact us. A small investment in the time of a professional could mean a saving in the tax that you land up paying.

Payments on Account – your deposit account with the Revenue

Mon, 25 Sep 2017 15:01:00 GMT

Payments on Account – your deposit account with the Revenue

Payment on Account is a tax payment made twice a year by self employed people, and also Director Owners taking dividends, in order to spread the cost of the year’s tax. It is calculated by looking at your previous year’s tax bill, and is due in two instalments.

So each of the two instalments of the Payment on Account will normally be 50% of your previous tax bill. So, if you paid £10,000 in the tax year for which you are filing your return, you will make the first Payment on Account of £5,000 on 31st January, and another payment of £5,000 on 31st July. This will include Class 4 National Insurance Contributions where applicable, but not student loan repayments or Capital Gains Tax.

You can also apply to have the Payment on Account reduced if you have a good reason to believe that you income in the following year will be less; this is often the case with dividends as a year with a high dividend declaration may be followed by a year with lower dividends and hence a lower overall tax bill. However be warned, if you do lower your payment on account and it turns out that you should have paid more the Revenue could charge you interest on the underpayment.

Paula

Unwrapping Self Assessment Tax

Mon, 18 Sep 2017 14:02:00 GMT

Dividends – will there be an early Christmas present?

Self Assessment Tax returns are a bit like Christmas! A strange statement I know but as I wander around the shops it is obvious that Christmas has arrived even though there are still three months to go! As most of you know, the deadline for your tax form is the end of January but already some of us are getting prepared and gearing up for this – just like the high street stores for Christmas.

This, the first in a series of articles dealing with frequently asked questions about self assessment tax returns, will look at how tax on dividends has changed and what this will mean for you.

Historically dividends were paid with a notional 10% tax credit which meant that, for basic rate tax payers, dividends would not attract any income tax. This gave a very tax efficient mechanism to director owned companies for transferring funds from their businesses. A tax efficient salary using up the personal allowance could be paid with the remaining amount up to the basic rate tax limit being taken as dividends. Income beyond this would attract higher rates of tax but for many owner directors the tax efficiency as a basic rate payer was sufficient.

This was replaced in the 2016/17 tax year with the first £5, 000 of dividend income being taxed at 0% and then a 7.5% rate applied to remaining dividends as a basic rate tax payer. Higher rate tax payers would face a rate of 32.5% and additional payers, 38.1%. This has a reasonable impact on all owner directors and already my clients are facing higher tax bills for the year ending 5th April 2017. However, it is worth remembering that using the tax efficient salary and dividend split will still reduce your tax bill rather than simply just paying yourself a salary.

The Spring budget 2017 announced that this rate would be further reduced to only £2, 000 for dividends paid after the 6th April 2018. However, this was cut from the Finance Bill 2017 due to the snap election and although it is widely expected to be included in the new bill there is a chance the further reduction could be abolished. Now, that would certainly be an early Christmas present for all owner director companies!

VAT – it’s a piece of cake!

Wed, 13 Sep 2017 11:38:00 GMT

Can you have your VAT cake and eat it?

I’m returning to one of my favourite subjects – VAT and yes, I know I need to get out more! I talk nationally on VAT but every time I do I learn something new – that is how complex our VAT system has grown.

It was actually introduced in 1973 as a pre requisite of the UK joining the European Economic Community (EEC). Now that we are leaving, I wonder if it will be dismantled – I very much doubt it as alongside corporation tax and income tax it is the third largest source of government revenue. It was introduced as a single rate of 10% on the purchase of most goods and services. VAT is a consumption tax which is levied at the end user, ie, the consumer, and therefore is the only tax that is not accrued due to earnings. It didn’t take long for the complexities to start and by 1974 there were already two rates of VAT and the notion of luxury goods being exploited. Today, the VAT network is vast and that’s only considering sales within the UK – once we start looking at trading into Europe there are a whole raft of new technicalities to grapple with.

Let’s take one example – Jaffa Cakes! Yes, I know you didn’t expect that. Did you know that no VAT is charged on plain biscuits and cakes? But when a biscuit is covered by chocolate it becomes a luxury item and therefore attracts VAT at 20%. The VAT man came knocking at McVities door claiming that a Jaffa Cake was a luxury biscuit and therefore should be VATable. McVities claimed that the Jaffa cake was a cake and therefore no VAT was due. How did they win – on a very simple argument that, when cake is stale it goes hard, where as a biscuit will be soft! Leave a Jaffa Cake out overnight and see what happens! Brilliant, got to appreciate McVities for that one – we can still enjoy our non VATable Jaffa Cake.

There are literally hundreds of anomalies like this in our VAT law so it is always worth having the professional deal with your VAT returns. Please do contact us if you need help with your VAT, don’t try and guess as the Revenue are clamping down further on VAT. We may not know the answer immediately but after a cuppa and a jaffa cake we’ll make sure that your VAT return is a piece of cake.

Where do we go from here…

Fri, 12 May 2017 09:30:00 GMT

8th June, the general election! But for those in small business what does that mean?

Recent times have been interesting – Brexit, Trump, two budgets in one year and now the election.

It’s enough to make any mind spin.

So, what’s important for small business. For those of you that run a limited company we’ve seen the introduction of the dividend allowance which means that to the financial year end 5th April 2017 dividends up to £5,000 will be a tax zero rate and thereafter, for normal tax rate payers, 7.5% will be applied, for higher tax payers it’s 32.5%. From the 6th April 2017 that allowance has been reduced to £2,000. Will it be further eroded or even abolished in the Autumn?

And for those of you who are sole traders how can we forget the increase of Class 4 contributions be 2% in the budget of April 2017 only to have this retracted! This only compounds my belief that the Conservative Party do not understand the true nature of small business. 99.6% of our economy is made up of small business, the clients I deal with, and I would welcome the opportunity to represent you to whoever is the new government.

I am waiting for a conversation with Greg Clark, the former MP for my constituency but also the former Secretary of State for Business, Energy and Industrial Strategy. I contacted him a couple of weeks ago and he has agreed to talk with me. My aim is to have a voice for every small business so that the future government understands the driving force of the economy.

When is it the right time to sell your company?

Wed, 03 Aug 2016 08:38:00 GMT

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The important thing is not being afraid to take a chance. Remember, the greatest failure is to not try. Once you find something you love to do, be the best at doing it.

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When is enough good enough?

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Why most small business fail in the last year?

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I make a conscious effort to keep things in perspective when I get burned out. It is easy to get stuck in the daily grind, but if you think about all the distance you have covered, and what lies ahead, it is much easier to feel motivated and optimistic.

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10 ways to improve your credit score

Wed, 03 Aug 2016 08:36:00 GMT

The important thing is not being afraid to take a chance. Remember, the greatest failure is to not try. Once you find something you love to do, be the best at doing it.

When is enough good enough?

Why most small business fail in the last year?

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Turnover is vanity, profit is sanity and cash is king

Wed, 03 Aug 2016 08:35:00 GMT

The important thing is not being afraid to take a chance. Remember, the greatest failure is to not try. Once you find something you love to do, be the best at doing it.

When is enough good enough?

Why most small business fail in the last year?

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5 cashflow tips that entrepreneurs wish they knew

Wed, 03 Aug 2016 08:33:00 GMT

The important thing is not being afraid to take a chance. Remember, the greatest failure is to not try. Once you find something you love to do, be the best at doing it.

When is enough good enough?

Why most small business fail in the last year?

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Why most businesses fail in the first year

Sun, 31 Jul 2016 01:34:00 GMT

The important thing is not being afraid to take a chance. Remember, the greatest failure is to not try. Once you find something you love to do, be the best at doing it.

When is enough good enough?

Why most small business fail in the last year?

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Companies and cars – business mileage

Sun, 06 Mar 2016 16:17:00 GMT

The downside is that you now have to record your business miles. I have a book in the car and record all my business journeys by noting the starting and finishing miles on the clock; yes, I know – I need to get out more! For those less in need of a life, google is a wonderful thing. You can plot your business journeys and it will tell you how many miles are involved. See, there’s no excuse for not measuring your business miles and claim your full 45 pence per mile!

Fabulous, just about to change into sixth gear and pull onto the overtaking lane. But then the brakes are applied when someone mentions that three lettered acronym . . . . VAT!!! Claiming this 45 pence per mile is all very well but what if you are VAT registered, can you reclaim the VAT? The good news is the answer is yes, but this is where it gets a bit complicated so it may not be time to put cruise control on just yet.

The portion of the 45/25 pence mileage rate that is for fuel is deemed to be those HMRC published advisory fuel rates on which you can claim back VAT. That’s a good start but how does that work?

So, lets take an example – if the car we owned had a 1400cc petrol engine, the fuel portion of the 45/25 mileage rate is 13 pence per mile (December 2014):

13 pence per mile represents 120% (100% plus 20% VAT) – no falling asleep at the wheel now!

Therefore 20/120 multiplied by the 13p is 2.2 pence per mile. So for each mile that you incur for business, you can claim back 2.2p in VAT.

There is one caveat, which is that you will need to show HMRC on request VAT receipts that have enough VAT on them to cover the claim. I know that sounds pedantic but considering all service stations are VAT registered it really doesn’t take much to ask for a VAT receipt when paying for your fuel.

So if 1000 miles is claimed in the VAT period, the total value on the receipts must be as follows:

The VAT reclaim will be 2.2p x 1000 = £22 and the fuel receipts should total £147.

With the right procedures in place it is possible to take every tax advantage of using your own car for business, even when that business is VAT registered. However, if these calculations have sent you into a near state of road rage there is one more option to consider – leasing! Could leasing a vehicle provide hassle free business miles or is it going to be another call out to the AA?!

So, in my last article in this series we’ll take a pit stop and look at the whole issue of leasing, will it lead you onto the motorway of hassle free business motoring or just give you another flat tyre . . .

Cars and Companies

Fri, 12 Feb 2016 12:17:00 GMT

Over a series of articles we’re going to take a look at the whole area of companies and cars. From basic questions of whether to purchase a car through the company or privately, how to account for the expenses and what to do about VAT. It is a particularly long and winding road that needs to be travelled with quite a few HMRC potholes that can lead to the need for AA assistance; and by AA I mean ‘accurate accounting’!! It is important to understand the tax implications of the decisions that you take right from the start of your journey; the right choice will mean that you turn straight onto the super highway rather than getting stuck in the country lanes or even worse, stopped by the police!
A question I am so often asked by company owners is whether they should buy their car through the company. This may sound attractive with promises of lower corporation tax and VAT breaks but, to be honest, Sat Nav says no!! Once a car is purchased through the company you will straight away hit a diversion and be directed to the dead end town of P11D. If purchased through the company the availability to use the vehicle will create a taxable benefit in kind on you as the individual. The amount of tax you will bear is dependent on the market list price of the car, based on CO2 emissions. And it is important to note that this list price is when the car was new, which may not be the price you paid for it, together with any extras added to the car. There will also be an additional taxable benefit in kind if your limited company pays for any of your private fuel costs.

Your limited company must then pay additional National Insurance on these benefits at a rate of 13.8% for 2014/15 and a P11D Form must be completed. This discloses the car details and the value of the benefit(s). Taxable benefits are treated as income and are therefore included in your total earnings for the tax year. In most instances this can mean that you are paying tax at 40% on benefits you receive if you are a higher rate taxpayer.

If you buy a car through your business then only a proportion of this will be available for tax relief and remember, even if you are VAT registered you cannot claim VAT on the purchase of a car if there is any private use whatsoever.

Have I put you off buying a car through the company yet?! There’s more but, as with any long journey, it’s time to take a break before we fall asleep at the wheel. Perhaps we’ve hit the end of the road on this one so we will look at the alternatives next time.

To pay dividends or not to pay dividends…

Wed, 04 Mar 2015 11:28:00 GMT

…that is the question! And one that I am currently being asked quite regularly by owners of small businesses.

Now, there are some very simple rules that need to be followed to ensure that any dividend declared is not done so illegally which could therefore result in an “overdrawn” Directors Loan Account and attract the usual HMRC penalties for this. If you’re not sure of what the penalties for this are let me sum it up in a one liner . . . . you would have to pay more to HMRC! So to avoid this ensure that the dividend is reasonable and in line with company profitability – you cannot declare a dividend on a loss! Also make sure you have the correct paperwork; you need the appropriate board resolution for the payment of the dividend and a dividend voucher must be given to each shareholder who receives dividends. And please make sure that this paperwork is filed away safely so that if HMRC do come knocking you can dazzle them with your swift production of the required documents.

But, how much dividend to pay – that becomes a completely different issue where the invention of a tax planning crystal ball would be far more useful than any calculator. Doing the sums isn’t the problem but ensuring tax efficiency becomes a dark art that any would be Hogwarts student would be proud to learn! And here it really is a question on timing. The best strategy is to declare dividends to ensure total income received by the individual does not push them into a higher tax bracket in that year.

So, in 2014/15, where your total income is no more than £41, 965 including taxable dividends there’ll be no tax for you to pay on them. Many business owners will take a minimum salary to ensure the personal tax allowance is used efficiently and then make up the rest of their income with dividends keeping a mindful eye on total income received.

There you go, an introduction to tax efficient legal dividends. However, please be careful in considering yourself an expert in dividends on these three short paragraphs alone. If this is an issue that you are keen to master please do contact us . . . I can’t promise to wave a magic want but we will be able to ensure that your well earned cash does not do so much of a disappearing act to the Revenue.

The calm before the storm…?

Wed, 04 Feb 2015 10:01:00 GMT

So, with the deadline of the 31st January out of the way for self assessment returns, life in the accounting world changes from full steam ahead to calm sailing in warm tropical waters. We all breath a deep sigh of relief and enjoy cocktails on the deck while waiting for the next whirlwind of activity that is likely to fill our sails. And with the end of the payroll year becoming visible a whisp of wind already stirring up giving warning of the storm that may be approaching.

However, with PAYE being reported to the HMRC in real time from the 6th Apriil 2013 we no longer have to grapple with forms P35 and P14. We have been told in no uncertain terms that they will be rejected if we do attempt to submit them! So what happens instead?

Well, at the end of the year you must make sure that you submit your final Full Payment Submission (FPS) and/or Employer Payment Summary (EPS) for the final pay period in that tax year. HM Revenue & Customs (HMRC) uses the information that you send to make sure that you and your employees have paid the right amounts of tax, National Insurance contributions (NICs) and student loan deductions for the tax year. The information is also used in the calculation of entitlement to state benefits, tax credits and pensions.

For most employers, this means you will send your final FPS on or before your last payday in the tax year, which ends on 5 April 2014. You must also indicate on your last FPS or EPS for the year that:

It is your ‘Final submission for the tax year’ and,

answer the end-of-year questions and declaration – you can find out more about these by following the link below to the section called ‘Final submission for the tax year and end of scheme information’ in the guide ‘What payroll information to report’

You must do this even if you have not made any deductions of PAYE tax or NICs from your employees in that pay period.

Simples! Although the use of the word “most” indicates that for some employers this two step year end process isn’t quite going to be enough. The HMRC bulletin continues on with further help and guidance for the year end requirements under RTI which I will save you the pleasure of disseminating in the bog. Suffice it to say that if you have any concerns regarding your payroll and the ability to meet HMRC year end requirements help is very much to hand here at M:Power Accounting.

Please contact us now to ensure that when the year end of the 5th April 2014 comes around your payroll is as water tight as an ocean going vessel and no HMRC storms are going to knock you off course towards the rocky shore.

RTI obligations and paying employees early

Sat, 13 Dec 2014 15:32:00 GMT

Christmas is that one month of the year when payroll can come around early. Most of your employees will love this until they realise that January is a very long month!!

But for employers there is that additional issue now to grapple with – how to handle an earlier pay date under RTI.

Simples…

Stick with one monthly payroll even if some of your employees don’t want to be paid earlier (they’ll be the ones looking smug at the end of January!) and follow these easy steps:

RTI legislation stipulates that the returns must be made before any payments are made to employees. By following the above steps you will keep both your staff and HMRC happy. What better way is there to start your Christmas celebrations! …well, one suggestion, let M:Power handle your payroll so that next Christmas you don’t even have to worry about it at all, just let us do that!!

Mpower Accounting Evolves

Sat, 22 Nov 2014 09:30:00 GMT

Welcome to our new website....this is the first blog post and we look forward to filling this blog section with lots of informative information relative to the financial success of your business.

MPower Accounting

MTD for Income Tax Is Here: What It Means for You

What’s changing for you:

The upside (it’s not just compliance)

Why Cheap, Outsourced Bookkeeping Could Cost Your Business More

Service Quality May Be Lower

Less Ongoing Support

Cheap Fees Can Lead to Higher Costs

Impact on Your Business

What to Look For Instead

Key Takeaway

New Year Resolutions for a Stronger and more Successful Business

1. Get Clear on Your Numbers (Not Just Your Turnover)

2. Improve Cash Flow, Not Just Sales

3. Price for Value, Not Fear

4. Build Systems That Save Time

5. Invest in Support (You Don’t Have to Do It Alone)

Final Thought

Selling land for development – will I pay tax?

When does PPR apply?

How do I show that the grounds were genuinely part of the garden?

What if planning permission is involved?

What if I’m not covered by PPR Relief?

MTD for Self-Assessment – is it time to become a Ltd Company?

Is it easy to transfer my business to a Limited Company?

Are Limited Companies affected by MTD?

What are the advantages of incorporating to avoid MTD for self-assessments?

What are the disadvantages of becoming a Limited Company?

What are the Alternatives to incorporation?

Identity Verification at Companies House – why is this being introduced and what do I need to do?

Why are these changes happening?

How to Complete Verification

What If You Don’t Comply?

What Can I do if my name has been used fraudulently as a Company Director?

Xero Price Increases 1 st September 2025 – how much more will I be charged?

What is HMRC’s Payment on Account System for Self-Assessment and how does it affect me?

When was this system first introduced?

Why did HMRC introduce Payments on Account?

There are three key reasons why HMRC introduced this system:

So how does the Payments on Account system work?

Who Needs to Make Payments on Account?

When Are Payments on Account Due?

What Happens When You File Your Next Tax Return?

Can You Reduce Payments on Account?

Yes you can.

Will Making Tax Digital for Self-assessment change the Payments on Account System?

From Corporate Finance to Business Owner

The Power of Mentorship in Tracy Bland’s Success

Why Did Tracy Bland Change Careers?

What were Tracy’s first steps in making her vision a reality

How Did Mentorship with Paula Veysey-Smith Support Tracy’s Business?

Why is Mentorship Important for Bookkeepers and Small Business Owners?

Working from Home Expenses You Can Claim in 2025–26

What can I claim as an employee of a company?

What can I claim if self-employed (sole trader or via a Partnership)?

1. Simplified Expenses (Flat Rate)

2. Actual Expenses Method

Can I make a claim for these expenses in my Limited Company?

Download the Free MPower Expenses Template

Tax Efficient Salary for Directors in 2025-26

Key changes in Employer National Insurance (NI) rates and thresholds for the 2025-26 year have meant advice on the tax efficient salary for Directors has significant altered.

Employment Allowance Eligibility

How will I be affected by Making Tax Digital for Income Tax (MTD for ITSA)?

What is Making Tax Digital for Income Tax?

Will Making Tax Digital affect me?

What will I have to do if my earnings are over the threshold?

When will I need to register for MTD?

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Understanding UK Tax Codes: A Complete Guide

What are these jumbles of letters and numbers?

What is a Tax Code?

Common UK Tax Codes and Their Meanings

Standard Tax Codes

Emergency Tax Codes

Worldwide and Non-Resident Tax Codes

Other Special Tax Codes

How to Check and Change Your Tax Code

Why Understanding Your Tax Code Matters

Need Help with Your Tax Code or Finances?

Bank of England Cuts Interest Rates and Slashes Growth Forecast: What It Means for Small Businesses

MPower Accounting is that help at hand for you!