TSA Accountants May Newsletter
The Cost of Living Crisis
Inside this Month's Newsletter
The Cost of Living Crisis
Why you need a Will
Important Date Coming Up
7th June - Deadline for VAT returns and payments of Accounting Quarter period ending 30th April.
19th May– Monthly deadline for postal payments of CIS, NICs and PAYE to HMRC
22nd May – Monthly deadline for electronic payment of CIS, NICs and PAYE to HMRC
31st May – Due date for payment of Corporation Tax for period ended 31st August 2021
31st May – Deadline for employers to give employees their P60’s
The Cost of Living Crisis
There has been much made of the cost of living crisis in the news recently. Many people are finding household bills rising as well as double-digit inflation and rising interest rates. The question in the media is what is the government doing about it and help it can help hard-pressed families? Without wishing to be political about this, looking at the facts they seem to be at least adding to these problems. The chancellor has frozen the tax-free allowance which amounts to a massive tax grab that will undoubtedly drag more people into the higher rate tax brackets. The increase in national insurance means at least until July some people (and employers) will be facing a national insurance increase of around 10%. Another 1.25% tax on dividends will see the tax on dividends increase by over 16%. The government has seen tax receipts increase with rising fuel prices.
In March The government issued a policy factsheet detailing the details of the help the UK government are providing to ease the cost of living increase. Details can be found here https://www.gov.uk/government/publications/government-support-for-the-cost-of-living-factsheet/government-support-for-the-cost-of-living-factsheet. Looking at a couple of the measures I can’t help but think the help is a little thin on the ground. For example, a cut of 5p per litre in fuel duty is welcome on the face of it, but cynical fuel companies have not passed this cut on in full, not only that but the government has seen tax revenues increase by over 6p per litre thanks to VAT they charge. The government has frozen alcohol duties. Given that the duty on a bottle of wine (regardless of whether it’s a £5 bottle or a £500 bottle) is £2.23 for a 75cl bottle. That’s aside from VAT. Given that freezing, the duty equates to a 14p saving, if you’ll excuse the pun it is small beer. So with the government offering very little in the way of help and hitting hard-pressed families with tax increases, it’s easy to forget that businesses too will be facing the same issues. So what does it all mean and what can we do about it?
Fuel prices have been talked about extensively in the press. Fuel costs are at record levels and forecast to go higher. This is having a massive impact on families and businesses alike. With petrol prices over £1.60 and Diesel over £1.70 per litre, a reduction in fuel duties would provide some welcome relief. Aside from that congestion charging zones are springing up around the UK too.
So what can we do as businesses and consumers? In the first instance meeting clients via video conferencing such as Zoom Teams instead of meeting in person will not only save fuel but travelling time too. This became more prevalent during lockdown but there’s no reason not to continue this now.
If you are looking at replacing your car, whether personal or company, consider electric. Although generally more expensive to buy or lease, the running costs are significantly lower than the equivalent petrol or diesel and the range between charges is reaching levels that make electric vehicles a much more practical alternative. Savings can well be in the thousands per annum and with benefit in kind rates being very low, at least into 2025, there’s never been a better time to buy an electric-powered car.
National Insurance Increases
It was announced in the autumn budget that NI would be increased by 1.25% to fund the NHS. Of course, this was a little disingenuous. Not only will it not initially all go to the NHS, but the increase from 12% to 13.25% for individuals may well be an increase in the rate of 1.25%, but in reality, is more than a 10% increase in real terms. This is also true for employers who were paying NI at 13.8% and will now pay 15.05%. NI for the self-employed has increased to 10.25% from 9%.
As employees, there’s not a lot we can do, however, as employers and business owners, there are a couple of things we can do. Firstly owner-manager limited companies should consider whether salaries for directors above the NI threshold are appropriate. It’s long been a tax-saving strategy to pay low directors' salaries and higher dividends. Secondly, if you are recruiting, consider using part-time staff instead of full-time staff as there may be no NI to pay or at least a lot less.
Rising Interest Rates
The Bank of England has raised interest rates four times in the last four months and this is forecast to continue. When the Bank of England raises interest rates, this increases the rate at which the major high street banks can borrow, which ultimately has to be passed on to the customer. The government-backed Recovery Loan Scheme has preferential interest rates and is only available until the end of June so if you are considering borrowing over the coming months, now might be a good time to borrow, even if you won’t need the money for several months as you might beat any further interest rate increases and save money.
Anyone who remembers the last time we had high inflation rates will remember mortgage rates once hitting more than 16%. No one is predicting interest rates at those levels but it’s clear that the bank of England will keep raising rates to tackle inflation. Rising interest rates could have a devastating effect on the property market (though falling house prices will help first-time buyers) and make borrowing less affordable for individuals and businesses, so why take such harmful action? The reason is that increasing interest rates is the main tool for tackling inflation that the Bank of England has to hand. This gives an indication as to just how harmful high rates of inflation can be. Given that we have had benign economic conditions prior to covid for over 20 years, inflation has barely gone above 2%.
The consequence of inflation is higher prices for both businesses and consumers alike. Rising inflation is why we are now paying more for everything from fuel to groceries to luxury goods. It can have a devastating impact. So what can we do about it? While there’s no doubt that until recently we’ve never had it so good, with most families enjoying more disposable income than their parents or grandparents ever had, there have been some warning signs that this couldn’t continue. The affordability of housing with rising rents and property prices leading to what’s been dubbed “generation rent”. There are things we can do though to soften the impact of inflation. The average person spends £641 per annum on takeaways according to 2021 figures. That’s an increase of 42%. So simply going back to 2020 levels would save £189. The branded coffee shop market is worth £4.4 Billion per year. So perhaps making our own in the office rather than buying that morning cappuccino on the way to work might be a pretty painless way to save some money. Ultimately though, the only way to survive rising inflation is to accept that we will have less purchasing power for our buck and cut back on discretionary spending. This holds true for businesses too. Businesses should also consider price increases. There is always a fear that large increases will cost business, but with annual inflation at over 8% and as high as 10% by some measures, not putting up prices will be very costly. If inflation continues at these rates, it will be even harder to put prices up next year where businesses could be looking at 17% increases to keep pace. So it’s worth taking a look at pricing now and if others in your industry are putting there’s up then put yours up too.
Why you need a Will
There are several reasons why you might want to consider a will, even if you are young.
A will is a legal document that sets out your wishes regarding the distribution of your property and the care of minor children.
Though no single document can take care of every issue that arises after death, a will, known as a last will and testament can go a long way to achieve this, particularly with a letter of wishes.
It will make matters easier for your family when processing your estate.
You can ensure that your estate goes where you want it to go. Laws of intestacy are very inflexible.
By planning ahead you can make plans to reduce, gift, or spend part of your estate if you know that your estate may be liable to pay inheritance tax. Inheritance tax, surveys have shown is one of the most unpopular taxes, so planning now may save inheritance tax later.
Not having a will can have many unintended consequences, including higher taxes through IHT, but also it can make an upsetting time for loved ones worse if there is disagreement over your intentions for say items with sentimental value as well of course as arguments over money and assets.
You can write a will yourself, but we’d recommend using a suitably qualified professional, such as a solicitor or will writer.
Generally speaking, a will costs between £100 and £750.
If you haven’t looked at your estate planning, why not give us a call and arrange an appointment? Starting at £200 plus VAT, our Inheritance Tax Review will give you peace of mind that you’ll have an idea of how much inheritance tax your estate may have to pay, and a list of recommendations and a plan to help reduce it. We’ll happily work with other professionals such as will writers and financial advisers to help ensure that your legacy goes where you want it to and out of the hands of the taxman. We pay enough taxes whilst we are alive without giving the taxman another big payday after we’ve gone.
Meet this Month's TSA Client
Bradley Stoke Radio is our local Community Radio Station based in studios off Brookway in Bradley Stoke.
We have been a part of the community for over 10 years, bringing people together with interviews, current affairs, news, music and more - to homes, offices, building sites, cars, anywhere with a radio!
Broadcasting across the North Bristol area on 103.4fm, online and on DAB, we broadcast 24 hours a day and have a wide range of music and community interest programmes.
We also attend events in the community, providing PA, music and live linked broadcasts.
Along side our ‘ON AIR’ programming, we have an active social media presence and a listen again service through our website and mixcloud – you never need to miss your favourite programme from Bradley Stoke Radio 103.4fm.
As a community radio station, we are run by volunteers who love our local area and are passionate about radio. We are supported by BSTC and South Gloucestershire Council along with opportunities for local businesses to sponsor or advertise with us – if you would like to join our regular advertisers, please do get in touch with us at email@example.com. In the meantime, 103.4fm, online and on DAB – please do turn that dial and tune in!
TSA Accountants March Newsletter
Spring Statement Special
Welcome to this month's Newsletter
Important Dates this month
7th April - Deadline for VAT
returns and payments of
Accounting Quarter period
ending 28th February.
19th April – Monthly deadline for
postal payments of CIS, NICs
and PAYE to HMRC
22nd April – Monthly deadline for
electronic payment of CIS, NICs
and PAYE to HMRC
30th April – Due date
for payment of
Corporation Tax for period ended
30th June 2021
Spring Statement – free pullout. Find
out what this means for you and your
Pages 2 – 4 Spring Statement
Page 5 Cloud Accounting
Page 4 – Client Zone
Meet this months’ TSA client
FAQ's this month
Spring Statement – What does this mean for me? (And what was in the small print?)
There were several points to note in thisspring statement, bit it’s fair to say this isn’t so much about the small print but more about the smoke and mirrors. Make no mistake, we are not getting tax cuts, but token gestures to slightly reduce the tax grab that’s currently in process. There’s absolutely no question at all that we will be poorer going forward than we are now.
Fuel prices have been talked about extensively in the press. I’m not going to rehash all of that commentary here, but fuel costs are at record levels and forecast to go higher. This is having a massive impact on families and businesses alike. With prices as high as £1.67
per litre, a reduction in fuel duties would provide some welcome relief.
There is a good case to reduce the government’s take from fuel. Estimates vary but given that the government gets VAT as well as fuel duties from every litre sold, it’s clear the government has profited massively from rising fuel prices. The chancellor has promised a reduction in fuel duty of 5p. Whilst
welcome, the government is profiting to the tune of 7p a litre based on current prices, and if fuel continues to rise in price, the government take will only increase. Compared with some of our European neighbours who have reduced their taxes by at least double the 5p the UK government has we can’t help but feel he could and should have gone much further. The other issue is that given past form, the petrol companies are unlikely to pass the fuel duty cut on in full, so we’ll still be punished at the pump. A reduction in VAT would have been much better. It wouldn’t have been diluted by any increase in price and the saving would have found its way to the customer.
National insurance increase
It was announced in the autumn budget that NI would be increased by 1.25% to fund the NHS. Of course this was more smoke and mirrors. Not only will it not initially all go to the NHS, but the increase from 12% to13.25% for individuals may well be an increase in the rate of 1.25%, but in reality, is more than a 10% increase in real terms. There have been calls from all sides of the house of commons and business groups to scrap or postpone the increase. The chancellor has resisted those calls and ploughed ahead with the planned increase from April. The increase also applies to employers NI which will rise from 13.8% to 15.05%. A further 1.25% will be added to tax on dividends, marking a 16.7% increase. This is not a 1.25% tax hike. This is an enormous tax hike. So,what was announced today? Well, these increases will still be going ahead, but from July the point at which employees pay NI will be raised in line with the tax -free allowance. Of course, the chancellor is trumpeting that this is the largest tax cut in history. But it’s not. It’s been brought in to offset the massive tax grab that he announced in the autumn. So, as much as it is welcome it’s not what it’s being dressed up to be and once taxpayers see their pay packets, they will surely see through this. The good news for employers is that the NI Employment Allowance will be increased from £4,000 to £5,000 meaning the first £5,000 of employers NI won’t be payable. So, could Rishi Sunak have done more? Absolutely. With the increased tax take from other areas, he could have scrapped the NI increase altogether. The increase in NI threshold has been long overdue and is welcome.
0% Green initiatives
The chancellor promised to scrap VAT on energy efficiency measures such as solar panels and heat pumps.
He said “We'll also reverse the EU's decision to take wind and water turbines out of scope - and zero rate them as well. And we'll abolish all the red tape imposed by the EU. A family having a solar panel installed will see tax savings worth over £1,000. And savings on their energy bill of over £300 per year.”. The policy will not apply immediately to Northern Ireland. This is another welcome measure but is really just tinkering.
Household support fund
This fund will be doubled from £500 Million to £1 Billion. This is a fund made available to local authorities to help those in most need. So is again a welcome measure.
The chancellor saved his best for last with an announcement that by the end of the parliament he would
reduce the basic rate of income tax from 20% to 19%.
As always with budgets and statements such as this, it’s often what’s said in the small print or what’s not said at all that has the biggest impact. This time it is a little different. The conservatives like to present themselves as the low tax party, but this time around they will be the party that raises taxes to their highest post-war level. After all the giveaways and rampant fraud through the pandemic, the last budget was a budget to claw back some of what was spent. This spring statement was an opportunity for the government to ease the burden on
hard-pressed families and businesses. Politicians of all parties are often accused of being out of touch and this statement will do little to dissuade that. This is a statement that ensures that tax increases announced in the budget will go ahead, whilst the chancellor is trying some slight of had by trying to convince us that this is in fact a giveaway, we aren’t fooled, and we don’t think our clients and the public
will be fooled either. Things are going to get bumpy. With inflation running at over 6% and in some quarters forecast to hit double digits for the first time since the1970’s, income tax-free allowances are going to be frozen for four years so more taxpayers will be dragged into the 40% band and some lower-paid employees will be dragged into the tax system that don’t pay income tax now. Arguably one of the successes of the coalition government was taking lower paid earners out of taxation altogether. Leaving the tax threshold at
£12,700 until 2026 will draw many lower paid earners back into paying income tax.
We warned of bumpy times ahead in our autumn budget review and our view has not changed, this Spring Statement only confirms and reinforces it. This was a great opportunity for this government to ease the pressure on hard-pressed taxpayerers and they’ve squandered it.
If you’d like to explore tax planning options for you and your business, give us a call to arrange an appointment. Prices start at £200 + VAT
and we might save you thousands. In the meantime, feel free to check our Spring
statement guide sent with this newsletter
Cloud Accounting, what is it ,and is it for me?
Cloud accounting (or online accounting) has all the same functionality as desktop accounting but moves the whole process to the cloud and expands upon it. There's no
desktop application – you log in to an always - up-to-date online solution and all data is safely stored on a cloud server. In this article we’ll look at the different suppliers, how it can help your business and bust some of the myths.
There are several reasons why you might
want to consider a switch to cloud based
• Data about your sales or income and purchases can flow straight from your bank to your books so you don’t spend
hours transcribing them
• You can see your current financial position at any time
• Multi-user access makes it easy to collaborate online with your team and advisors
• It’s online software so there’s nothing to install or update, and all your data is backed up automatically.
• You can set up a dashboard showing important financial information like who owes you money, what bills are due, and how your cash flow is looking
• Compliance with Making Tax Digital (MTD)
There are several providers, but we’ve listed what we think are the best ones.
Xero –our cloud-based software of choice, the one we recommend. This can be available for as little as £12 per month plus VAT. Easy to use, very intuitive with great online video tutorials and excellent support.
Quickbooks - The biggest cloud-based provider.
Excellent value for money with lots of functionality. Not as intuitive as Xero and overhyped in their advertising.
Freeagent – Not really free unless you have a Natwest business account, then it is. Not as many features as Xero or Quickbooks, but relatively easy to use with good support.
5 cloud accounting myths
• It’s less secure than desktop software – wrong, it’s actually more secure and
data is backed up
• Migrating data is complex. For a good bookkeeper or accountant, this should be a straightforward process.
• I’ll have less control – wrong. You’ll actually have more with access to real
• Cloud software can replace my bookkeeper or accountant. – no, wrong again.
Despite Quickbooksadvertising it’s easy to get a lot wrong and have to pay to put it right. Cloud software should mean less bookkeeping hours
meaning less on book -keeping fees.
• It’s expensive – wrong again. It can be free if you have a Natwest account, or
from as little as £12 per month + VAT.
If you are still unsure whether cloud-based accounting is for you, give us a
call and we can go through the best options for you.
Meet This month's TSA Client
AB Marketing Specialist in
Lead Generation and Marketing
AB Marketing is our choice for lead generation. Abby runs the business and her passion for what she does, as well as her knowledge is evident from your very first contact with her. Abby and her team get results but are also gentle in their approach too, so you know your potential customers are in safe hands. We’ve used Abby and her team for a number of years and can’t praise them highly enough. Every month we receive feedback on our campaigns so we can hone them where necessary and monitor performance. Here is what Abby has to say about AB Telemarketing
AB Marketing Ltd undertake lead generation, direct sales or appointment setting for clients depending on individual requirements.
All the while building relationships with potential new clients and building pipelines for the future.
We are now around year 12 of trading and I have gone from just me on my own to a home-based team of 18 agents. We
work across many sectors including, M&E, Training, Construction, Finance, Film, Publishing, Merchant Services, Commercial cleaning and several Software companies to name a few.
We work as extension of our clients’ teams and we can offer data cleansing, data building, customer satisfaction calls, customer re-engagement (lapsed customers), appointment setting, event invitations, online demo bookings and research too.
So now you know you can contact
AB Marketing with confidence.
Contact details are:
0845 570 8725
I work in the construction industry and normally receive a tax rebate because CIS is deducted before I’m paid. Why haven’t I received a refund this year?
There are several reasons why you may not have had a refund this year. Covid grants were given to the self-employed and these are taxable income, so when calculating a refund. CIS is deducted from every £1 of labour at the rate of £20 per £1 if you are a verified subcontractor. The refund arises because no allowance is made for the tax free allowance of £12,570. However, once earnings are over £12570, the deduction of 20% is not enough as tax plus NI will total 30.25%. So the higher your earnings the lower your tax rebate until you reach a tipping point where Income tax is payable because not enough tax is payable
My mate claims a lot more expenses than me and he’s never had a problem so why are you saying I can’t claim the same?
This is a question we get a lot. When tax rates go up, as they have recently, the inclination is to put through more expenses to compensate. This isn’t a great idea however. Not every self-assessment is checked. HMRC’s approach is to accept now and check later. This means that yes your mate may have claimed more expenses, but if HMRC single him out for investigation, they may well go back six years for underpaid tax and possibly penalties. There are a lot of legitimate ways to reduce tax bills, but not eliminate them If you’d like to discuss ways to reduce your tax bill please feel free to contact us to arrange an appointment.
Well, that’s pretty much it for this newsletter. I hope it’s been useful and informative. We are out of lockdown, still working and looking for new clients! Enjoy the sunshine, they haven’t put a tax on that yet!
We do run a reward scheme, a bottle of wine when your recommended client pays our first invoice!
TSA Accountants - 0117 923 5394 - firstname.lastname@example.org